On November 11, 2015, Governor Scott Walker signed Senate Bill 287 into law as 2015 Wisconsin Act 90. The law is a collection of miscellaneous changes and updates to Wisconsin’s Insurance Code, including technical corrections and updates driven by changes to the National Association of Insurance Commissioners (NAIC) Model Laws.

Among other changes, Act 90 does the following:

Implements Principles-Based Reserving

Act 90 adopted a number of changes to Wisconsin’s standard valuation law (Wis. Stat. § 623.06) in order to conform Wisconsin’s standard valuation law with the NAIC’s current Model Standard Valuation Law. This change makes Wisconsin the 39th state to adopt the NAIC’s changes to the standard valuation law intended to implement principles-based reserving for life insurance companies.

Once 42 states — a supermajority representing at least 75 percent of the total U.S. life insurance premiums — adopt these revisions, principles-based reserving will be gradually implemented (over three years) for new business written by life insurers. The NAIC’s Principle-Based Reserving Implementation (EX) Task Force continues to discuss the exact terms of implementation for PBR and for the new Valuation Manual, including determination of when 42 states have adopted the Model Standard Valuation Law or law with “substantially similar terms and provisions.”

Changes Treatment of Qualified Financial Contracts (QFCs) in Receivership

Section 67 of Act 90 created a new Section 645.675 of the Wisconsin Statutes which adopts Section 711 of the NAIC Insurer Receivership Model Act. This provision standardizes the treatment of QFCs (such as commodity contracts, forward contracts, repurchase agreements, and swap agreements) that are used by some insurers to manage and hedge against interest rate and exchange rate changes that would otherwise potentially harm the insurer’s ability to meet its obligations to policyholders and beneficiaries. Section 645.675 provides for QFCs to be treated the same in insurance insolvency proceedings as they are treated under federal bankruptcy laws and other federal and foreign laws, which set out standards for the closing and netting of QFCs in bankruptcy (and other insolvency proceedings). While Wisconsin domestic insurers previously faced difficulties entering into QFCs, including unfavorable pricing or terms, as compared to their competitors in other states that have already adopted Section 711, the adoption of Section 711 in Wisconsin will facilitate domestic insurers’ access to QFCs on competitive terms and simplify any future insolvency proceedings in which QFCs are at issue.

Allows the Office of the Commissioner of Insurance (OCI) to Share Information With International Regulatory Organizations

Sections 6 and 44 of Act 90 allow the Commissioner to share information regarding internationally active insurance entities subject to OCI oversight with international insurance regulators and certain supervisory colleges.

Specifically, Section 6 of Act 90 adds the International Association of Insurance Supervisors (IAIS), and its employees, to the list of entities with which the Commissioner may communicate while still preventing public disclosure of such communications. Under Section 601.465(1m), OCI may now “refuse to disclose” any “[t]estimony, reports, records, communications, and information” sent to or received from IAIS under a “pledge of confidentiality or for the purpose of assisting or participating in monitoring activities.”

In addition, Section 44 of Act 90 allows the Commissioner to “share confidential information” with “international regulatory agencies” so long as the communication of confidential information is “in furtherance of the performance of the commissioner’s regulatory duties.”

Automatically Allows Licensing for Agents That Have Met Requirements in Similar States

Section 46 of Act 90 makes it easier for nonresident applicants to obtain insurance agent licenses in Wisconsin. Prior to Act 90, Section 628.07 allowed the Commissioner to waive the examination requirement for a nonresident applicant so long as the “the jurisdiction of the applicant’s residence has imposed upon the applicant requirements substantially as rigorous as those of [Wisconsin] and has enforced them with comparable rigor.” Now, the Commissioner must waive “any examination requirement” if “the applicant’s home state or state of residence has issued the applicant a license for which the qualifications are equivalent to the qualifications for a license issued by [Wisconsin] and if that license is in good standing at the time of application.”

This amendment reflects the licensing reforms initiated by the passage of the National Association of Registered Agents and Brokers Reform Act of 2015 (NARAB II). NARAB II establishes a central registry that allows an insurance producer licensed in their home state to perform similar functions in every other state, so long as they pay their home state’s licensing fee. NARAB II promises to substantially simplify the licensing and compliance landscape for producers who sell in multiple states, and the changes made to Section 628.07 indicate that Wisconsin is open for business for producers licensed in multiple states.

Reduces Various Reporting Requirements

Act 90 repeals Sections 628.81, 601.422, 601.425, and 601.428 of the Wisconsin Statutes. Those sections required agent commission rate reports, commercial liability insurance reports, product liability insurance reports, and cancellation and rescission reports, respectively, for insurers that issue individual health insurance policies. Covered entities are no longer required to make these reports.

Act 90 also amends Section 611.63(4) of the Wisconsin Statutes to limit the type of executive compensation reports required. Prior to the amendment, the compensation to “each director and each officer and employee whose remuneration” exceeded an “amount established by the commissioner” had to be “included in the annual report made to the commissioner.” Now, the report need not include “employees,” but only “each director and each officer and member of executive management, as defined by the commissioner.” This means domestic insurers’ compensation reports will be much shorter in the future, because the compensation of employees not defined as “executive management” will no longer be subject to disclosure.

Modernizes the Powers of Stock Company Board Committees

Sections 10 and 11 of Act 90 make technical corrections to Sections 611.07(4) and 611.56(5), respectively, that modernize governance procedures for Wisconsin domestic insurers. The changes to Section 611.07 permit committees of the board of directors of Wisconsin domestic stock insurers to take action without a meeting pursuant to Section 180.0821 (e.g., by written consent). Similar changes permitting committees of the board of directors of Wisconsin domestic mutual insurers to act without a meeting were adopted in 1997, in conjunction with the repeal and recreation of Chapter 181. The changes to Section 611.56: (i) conform that section to the revised Section 611.07, and (ii) permit committees of the board of directors of Wisconsin domestic stock and mutual insurers to conduct official committee meetings by telephone or other electronic communication pursuant to Sections 180.0820 and 181.0821, respectively.

Changes the Rate Determination Process for the Injured Patients and Families Fund

Sections 76 through 84 of Act 90 amend Section 655.27 of the Insurance Code to allow the Commissioner to control the determination of annual assessments paid to the Injured Patients and Families Fund. Prior to Act 90, Section 655.27 required that these fees be set by rule.

Sections 85 through 87 of Act 90 create similar changes with regard to Wisconsin's mediation fund. For example, the Board of Governors of the Injured Patients and Families Compensation Fund may now "set fees to charge health care providers" directly. Prior to Act 90, such changes could only be made by rule.

In both cases, the changes permit OCI and the Injured Patients and Families Compensation Fund Board of Governors to set fees and assessments on a timely basis without going through the emergency rulemaking process.

Updates Security Fund Assessment Requirements for Insurers That Change Their License

Section 75 of Act 90 creates a new provision, Wis. Stat. 646.51(10), that specifies how insurers that convert to a different type of entity or license should calculate their assessment fee for the Wisconsin Security Fund. Section 646.51(10) has two sub-sections.

Sub-section (a) creates specific rules for "assessments authorized prior to or during the year of conversion," and states that an insurer is liable for "assessments to cover the obligations of the account or accounts to which it was subject prior to conversion." Sub-section (b) states the rule for "assessments authorized after the year of conversion," and states that an insurer is liable for "assessments to cover the obligations of the account or accounts to which it is subject after conversion."

Changes Town Mutual Regulation

Sections 12 through 28 of Act 90 alter various powers and procedures for town mutuals. These include removing town mutuals’ ability to assume reinsurance under Section 612.31, and significantly reducing the procedural and content requirements for annual reports under Section 612.14. Town mutuals should also note the simplification of requirements to appoint adjustment committees under Section 612.13(4) and the reduced power of town secretaries to “administer oaths” and “take acknowledgments necessary to adjust claims against” town mutuals under Section 612.53.

However, some changes regarding town mutuals are less significant. For example, town mutuals are no longer required to include the words “town mutual” as part of their corporate name under Section 612.02. Likewise, Act 90 amends certain provisions regulating the time periods that different types of farm property may be removed from a town mutual’s specific area under Section 612.32.