Minnesota Session Laws - 2004, Regular Session

                            CHAPTER 227-H.F.No. 2139 
                  An act relating to title insurance; providing for 
                  required premium reserves; defining a term; amending 
                  Minnesota Statutes 2002, sections 68A.02; 68A.03, 
                  subdivision 3; proposing coding for new law in 
                  Minnesota Statutes, chapter 68A. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 2002, section 68A.02, is 
        amended to read: 
           68A.02 [UNEARNED HISTORIC STATUTORY PREMIUM RESERVE.] 
           Subdivision 1.  [1964-2001 PREMIUM RESERVE.] Upon issuance 
        of each contract of title insurance issued on or after January 
        1, 1964, through January 1, 2001, by a domestic real estate 
        title insurance company, there shall be reserved initially a sum 
        equal to ten percent of the original premium charged therefor.  
        At the end of each calendar year following the year in which the 
        contract of title insurance is issued, there shall be a 
        reduction in the sum so reserved in the amount of one-twentieth 
        of such sum.  On any contract of title insurance issued prior to 
        January 1, 1964, by a domestic real estate title insurance 
        company, a reserve shall be set up on January 1, 1964, and 
        thereafter maintained in such sum as would have been required if 
        the foregoing requirements with respect to title insurance 
        reserves had existed at and after the date of the contract of 
        title insurance.  Such sums herein required to be reserved shall 
        at all times and for all purposes be considered and constitute 
        unearned portions of the original premiums on such contracts of 
        title insurance, shall be charged as a reserve liability of the 
        real estate title insurance company in determining its financial 
        condition, and, for the purpose of applying the provisions of 
        section 60A.23, subdivision 4, shall be deemed to constitute the 
        whole amount of the premiums on the unexpired risks of such real 
        estate title insurance company.  
           Subd. 2.  [2001-2004 PREMIUM RESERVE.] (a) Additions to the 
        reserve after January 1, 2001, and through January 1, 2004, must 
        be made out of total charges for title insurance policies and 
        guarantees written, equal to the sum of the following items, as 
        set forth in the title insurer's most recent annual statement 
        filed with the commissioner; 
           (1) for each title insurance policy on a single risk 
        written or assumed after January 1, 2001, a minimum rate of 
        $0.36 per $1,000 of net retained liability for policies under 
        $500,000 and $0.16 per $1,000 of net retained liability for 
        policies of $500,000 or greater; and 
           (2) a minimum of eight percent of escrow, settlement, and 
        closing fees collected in contemplation of the issuance of title 
        insurance policies or guarantees. 
           (b) The amounts in paragraph (a) must be released from the 
        reserve in accordance with section 68A.03, subdivision 3, 
        paragraph (b). 
           Sec. 2.  Minnesota Statutes 2002, 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, 2001 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) additions to the reserve after January 1, 2001, must 
        be made out of total charges for title insurance policies and 
        guarantees written, equal to the sum of the following items, as 
        set forth in the title insurer's most recent annual statement 
        filed with the commissioner 2004, a sum equal to a minimum of 
        eight percent of the following items: 
           (A) for each title insurance policy on a single risk 
        written or assumed after January 1, 2001, a minimum rate of 
        $0.36 per $1,000 of net retained liability for policies under 
        $500,000 and $0.16 per $1,000 of net retained liability for 
        policies of $500,000 or greater direct risk premiums written; 
        and 
           (B) a minimum of eight percent of escrow, settlement, and 
        closing fees collected in contemplation of the issuance of title 
        insurance policies or guarantees 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. 3.  [68A.04] [DEFINITION OF DIRECT RISK PREMIUMS.] 
           For purposes of this chapter, "direct risk premiums" means 
        the charge for title insurance made by a title insurance company 
        or its agents according to the company's rate filing approved by 
        the commissioner of commerce without a deduction for commissions 
        paid to or retained by the agent and is that portion of the fee 
        charged by a title insurance company to an insured or an 
        applicant for insurance for the assumption by the title 
        insurance company of the risk created by the issuance of the 
        title insurance policy.  Direct risk premiums of a title 
        insurance company do not include any other charge or fee for 
        abstracting, searching, or examining the title, or for escrow, 
        closing, or other related services. 
           Presented to the governor May 15, 2004 
           Signed by the governor May 19, 2004, 11:30 a.m.