AN ACT TO MAINTAIN NAIC ACCREDITATION OF THE DEPARTMENT OF INSURANCE BY MAKING REVISIONS TO THE LAWS GOVERNING CREDIT FOR REINSURANCE AND RESERVE FINANCING. SL 2021-114. Enacted Aug. 23, 2021. Effective Sept. 1, 2021, except as otherwise provided.
Bill Summaries: S299 NCDOI NAIC ACCREDITATION.-AB
Summary date: Aug 24 2021 - View Summary
Summary date: Aug 4 2021 - View Summary
House committee substitute to the 2nd edition makes the following changes.
Makes technical changes to the proposed changes to GS 58-7-21(b), which allows for credit when reinsurance is ceded from an insurer domiciled in the State to an assuming insurer licensed to transact reinsurance by, or have its head office or is domiciled in, a reciprocal jurisdiction.
Makes technical changes to the act's effective date provision.
Summary date: May 6 2021 - View Summary
Senate committee substitute to the 1st edition makes the following changes.
Makes revisions to proposed GS 58-7-21(b)(4b), which allows for credit when reinsurance is ceded from an insurer domiciled in the State to an assuming insurer licensed to transact reinsurance by, or have its head office or is domiciled in, a reciprocal jurisdiction. Makes changes throughout to the formatting of internal cross-references.
Revises proposed GS 58-7-22, which establishes general requirements for life insurance ceded for reserve financing purposes. Makes clarifying changes to internal cross-references. Revises new GS 58-7-22(e)(1)g.1. to require the determination of reinsurance credit for ceded reserves, when a reinsurance treaty subject to this statute cedes risk on both covered and noncovered policies, be determined pursuant to subsections (g) and (h) in addition to subsection (f). Makes further technical changes. Codifies the statute's effective date of September 1, 2021.
Summary date: Mar 15 2021 - View Summary
Identical to H 150, filed 2/24/21.
Modifies the requirements set out for certified reinsurers in GS 58-7-21(b)(4a) which qualify the domestic ceding insurer for credit as either an asset or a reduction from liability on account of reinsurance ceded. Amends the filing requirements that must be met for the reinsurer to be certified by the Commissioner of Insurance (Commissioner) to require annual filing of the most recent audited financial statements, regulatory filings, and actuarial opinion, with English translation (previously specified accounting principles required of financial statements, and allowed for international financial reporting standards). Additionally, requires audited financial statements for the last two rather than three years filed with the certified reinsurer's supervisor following initial certification. Makes conforming changes regarding the factors the Commissioner can consider during the evaluation process to assign a rating to each certified reinsurer not domiciled in the US.
Enacts GS 58-7-21(b)(4b) allowing for credit when the reinsurance is ceded from an insurer domiciled in the State to an assuming insurer licensed to transact reinsurance by, or have its head office or be domiciled in, a reciprocal jurisdiction. Defines reciprocal jurisdiction to mean a jurisdiction designated by the Commissioner on the published list of reciprocal jurisdictions which either (1) is a non-US jurisdiction subject to an in-force covered agreement with the US, each within its legal authority, or a member of the EU covered with an agreement between the US and the EU, (2) is a US jurisdiction that meets the requirements for accreditation under the National Association of Insurance Commissioners (NAIC) financial standards and accreditation program, or (3) a qualified jurisdiction that the Commissioner determines to meet four additional specified requirements, consistent with the terms and conditions of in-force covered agreements. Defines covered agreement to mean an agreement entered into pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act that is in effect or in a period of provisional application and addresses the elimination of collateral requirements as a condition for entering into any reinsurance agreement with a ceding insurer domiciled in the State or for allowing the ceding insurer to recognize credit for reinsurance. Details six conditions assuming insurers must meet for credit to be allowed when the reinsurance is ceded, including: (1) having and maintaining minimum capital and surplus calculated on an annual basis at $250 million, as specified; (2) having and maintaining a minimum solvency and capital ratio on an ongoing basis, as either specified by covered agreement, the Commissioner, the reciprocal jurisdiction, or statute, based on where the assuming insurer is domiciled and whether it is an association; (3) agreement to and provision of adequate assurance to the Commissioner in the form of a properly executed NAIC Form RJ-1 regarding notification of noncompliance with minimum requirements, consent to jurisdiction, consent to payment of final judgments, inclusion of full security provision in each reinsurance agreement, confirmation of no participation in a solvent scheme of arrangement, as defined, and agreement to meet the specified filing requirements; (4) provision of specified documentation requested by the Commissioner; (5) maintaining a practice of prompt payment of claims under reinsurance agreements, as evidenced by specified criteria; and (6) annual confirmation of compliance with minimum capital and surplus and solvency and capital ratio requirements. Allows for voluntary provision of information to the Commissioner.
Requires the Commissioner to create and publish a list of reciprocal jurisdictions, based on the NAIC published list. Allows for additions and removal of jurisdictions as specified. Also requires the Commissioner to create and publish a list of assuming insurers that have satisfied the conditions and to which cessions must be granted for credit, as specified. Authorizes the Commissioner to revoke or suspend eligibility of the assuming insurer for recognition if the Commission finds that an assuming insurer is no longer compliant. Details the effect of suspension and revocation.
Details procedure the Commissioner must follow before denying statement credit or imposing a requirements to post security, or adopting any similar requirement that will have substantially the same regulatory impact as security, including notice requirements and the opportunity for corrective action by the assuming insurer.
Authorizes seeking a court order requiring the assuming insurer to post security for outstanding ceded liabilities in the event the ceding insurer is subject to a legal process of rehabilitation, liquidation, or conservation. Specifies that parties to a reinsurance agreement can agree on security requirements or other terms unless expressly prohibited by law.
Limits the scope of new subsection (4b) to reinsurance agreements entered into, amended, or renewed on or after September 1, 2021, and only with respect to losses incurred and reserves reported on or after the later of the date on which the assuming insurer has met the eligibility requirements specified and the effective date of the new reinsurance agreement, amendment, or renewal. Specifies that ceding insurers' right to take credit for reinsurance under other applicable laws is not affected; assuming insurers are not authorized to withdraw or reduce the security provided under any reinsurance agreement except as permitted by the terms of the agreement; and the provisions do not limit parties' capacity to renegotiate any reinsurance agreement.
Makes changes to include credit allowed under new subsection (4b) in the existing provisions regarding exceptions for noncompliant assuming insurers, and required trust agreements.
Makes further technical changes.
Enacts GS 58-7-22 to establish general requirements for life insurance ceded for reserve financing purposes. Requires some or all of the assets to secure the reinsurance treaty or to capitalize the reinsurer to be either (1) issued by the ceding insurer or its affiliates, (2) not unconditionally available to satisfy the general account obligations of the ceding insurer, or (3) create a reimbursement, indemnification, or other similar obligation on the part of the ceding insurer or any of its affiliates, as specified. States the legislative purpose and intent, and provides nine defined terms. Sets the scope of the statute to include reinsurance treaties that cede liabilities pertaining to covered policies, as defined, issued by an life insurance company domiciled in the State. Defines covered policies to include (1) life insurance policies with guaranteed nonlevel gross premiums or guaranteed nonlevel benefits, excluding flexible premium universal life insurance policies, and (2) flexible premium universal life insurance policies with provisions resulting in the ability of a policyholder to keep a policy in force over a secondary guarantee period. Excludes grandfathered policies, defined as covered policies which were issued prior to January 1, 2015, that were ceded, as of December 31, 2014, as part of a reinsurance treaty that would not have met one of the exemptions set out in the statute had the statute been in effect.
Makes the statute, GS 58-7-21 (regarding credit allowed a domestic ceding insurer) and GS 58-7-26 (regarding asset or reduction from liability for reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of GS 58-7-21) applicable to those reinsurance treaties, with the statute superseding in case of conflict. Identifies six exemptions to the statute. Details the actuarial method to be applied to establish the required level of primary security, as defined, for each reinsurance treaty subject to the statute to be VM-20, as defined. Details valuation to be used for purposes of calculating the required level of primary security and determining the amount of primary security and other security held by or on behalf of the ceding insurer.
Establishes six conditions that must be met for credit to be allowed with respect to ceded liabilities pertaining to covered policies under GS 58-7-21(b) or GS 58-7-26(a), including (1) full establishment of credit reserves with claimed credit not exceeding the proportionate share of reserves ceded under the contract, (2) funds consisting of primary security are held by or on behalf of the ceding insurer on a funds withheld, trust, or modified coinsurance basis, (3) trusts used to satisfy the specified requirements comply with specified state regulation, except as provided, and (4) the Commissioner approves the reinsurance treaty. Requires satisfaction of the six conditions as of the date the risks under covered policies are ceded if that date is on or after the effective date of the act., and on an ongoing basis thereafter. Provides for deficiencies under the conditions.
Requires each life insurance company that has ceded reinsurance within the scope of the statute to perform an analysis prior to the due date of each quarterly or annual statement, to determine as to each reinsurance treaty whether as of the immediately preceding calendar quarter, the valuation meets the specified security conditions. Provides two exceptions.
Provides a severability clause. Precludes action to avoid the requirements of the statute.
Provides that the act is effective September 1, 2021, and applies to covered policies entered into, amended, or renewed on or after that date.