FEDERAL LEGISLATIVE UPDATE
On September 9, 2009, the U.S. House of Representatives passed unanimously H.R. 2571, the Nonadmitted and Reinsurance Reform Act (bill text and bill summary), by voice vote. As previously reported in our June 9, 2009 post, this legislation seeks to streamline the regulation of non-admitted insurance and reinsurance.
The principal provisions of the legislation: (1) regulate premium taxes for nonadmitted insurance; (2) provide that the placement of nonadmitted insurance shall be subject to regulation solely by the insured’s home state; (3) limit the ability of a state to establish eligibility requirements for US domiciled nonadmitted insurers that vary from the Non-Admitted Insurance Model Act; (4) require a GAO study of the nonadmitted insurance market; (5) regulate the extent to which a state may not recognize credit for reinsurance for an insurer’s ceded risk; (6) partially pre-empt the extraterritorial application of the law of a state to a ceding insurer not domiciled in that state; and (7) provide that in most circumstances a state that is the domicile of a reinsurer shall be solely responsible for regulating its financial solvency. This bill has been referred to the Committee on Financial Services, and in addition to the Committee on the Judiciary.
The legislation was received in the Senate and referred to the Committee on Banking, Housing, and Urban Affairs on September 10, 2009.
STATE REGULATORY UPDATE
The Oregon Division of Insurance (DOI) adopted temporary rule OAR 836-012-0331 (rule text and rulemaking order) on the treatment of reinsurance reserve credits or assets under agreements prior to November 9, 1995. The temporary rule replaces OAR 836-012-0330, which, according to the DOI, was apparently repealed in error. The repeal of that rule removed the prohibition of an insurer reporting reserve credits or assets established with respect to existing reinsurance agreements entered into prior to the effective date of the Life and Health Reinsurance Agreements Model Regulation (OAR 836-012-0300 to 836-012-0330). According to the DOI, the repeal violated the Reinsurance Ceded accreditation standard, Part A, 10(m).
In order to remain accredited, the DOI was required to adopt the temporary rule. The temporary rule provides that any reserve credits or assets established with respect to reinsurance agreements entered into prior to November 9, 1995 that would not be entitled to recognition under the provisions of OAR 836-012-0300 to 836-012-0330 must be reduced to zero for purposes of the insurer’s annual statement filing. The temporary rule is effective July 9, 2009 through December 24, 2009.