5. Summary of and preliminary comparison with any existing or proposed federal regulation that is intended to address the activities to be regulated by the proposed rule:
There are no federal regulations which address these activities.
6. Comparison of similar rules in adjacent states as found by OCI:
Adjacent states have substantially similar provision which may be found at the citations listed below.
Illinois: 215 ILL. COMP. STAT. 5/173.1
Iowa: Iowa Code §§ 521B.101 to 521B.106
Minnesota: Minn. Stat. §§ 60A.09 to 60A.095
7. A summary of the factual data and analytical methodologies that OCI used in support of the proposed rule and how any related findings support the regulatory approach chosen for the proposed rule:
OCI based this rule on the NAIC model law and regulations as adopted and that have been enacted or will likely be enacted by all 51 jurisdictions in the United States and Puerto Rico.
8. Any analysis and supporting documentation that OCI used in support of OCI’s determination of the rule’s effect on small businesses under s. 227.114: See the attached Private Sector Fiscal Analysis.
9. A description of the Effect on Small Business:
This rule will have little or no effect on small businesses. This rule will reduce the collateral requirements of certain reinsurers with at least $250 million in capital so would not affect small businesses. There may be some insurers that qualify as small businesses who cede risk to reinsurers but the rule is not expected to have any effect on their ability to take credit for reinsurance ceded and could make it easier to do business with a reinsurer.
10. Agency contact person:
Phone: (608) 267-9586
Address: 125 South Webster St – 2nd Floor, Madison WI 53703-3474
Mail: PO Box 7873, Madison, WI 53707-7873
11. Place where comments are to be submitted and deadline for submission:
The deadline for submitting comments is 4:00 p.m. on March 3, 2017 as stated in the Notice of Hearing.
Mailing address:
Richard B. Wicka
Legal Unit - OCI Rule Comment for Rule Ins 52
Office of the Commissioner of Insurance
PO Box 7873
Madison WI 53707-7873
Street address:
Richard B. Wicka
Legal Unit - OCI Rule Comment for Rule Ins 52
Office of the Commissioner of Insurance
125 South Webster St – 2nd Floor
Madison WI 53703-3474
Email address:
Richard B. Wicka
The proposed rule changes are:
SECTION 1. Ins 52.02 is amended to read:
Ins 52.02 Except as provided by s. Ins 52.04 and unless otherwise prohibited by the commissioner, a licensed domestic insurer may take credit for ceded reinsurance as either an asset or a deduction from liability only if the reinsurer at all times complies with one or more of the following: SECTION 2. Ins 52.02 (2) (g) is amended to read:
Ins 52.02(2)(g) Unless otherwise specifically approved in writing by the commissioner, maintains policyholder surplus in an amount which is not less than $3,000,000 $20,000,000.
SECTION 3. Ins 52.02 (2) (h) is created to read:
Ins 52.02(2)(h) Demonstrates to the satisfaction of the commissioner that it has adequate financial capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from domestic insurers. An assuming insurer is presumed to meet this requirement as of the time of its application if it maintains a surplus as regards policyholders in an amount not less than $20,000,000 and its accreditation has not been denied by the commissioner within (90) days after submission of its application.
SECTION 4. Ins 52.02 (3m) is repealed.
SECTION 5. Ins 52.02 (4) (d) is amended to read:
Ins 52.02(4)(d) If the reinsurers are a group including incorporated and individual unincorporated underwriters, the reinsurers maintain in a trusteed account funds equal to an amount that is not less than the group's aggregate liabilities attributable to business written in the United States, for reinsurance ceded under reinsurance agreements with an inception, amendment or renewal date on or after January 1, 1993, in an amount not less than the respective underwriters’ several liabilities attributable to business ceded by United States domiciled ceding insurers to any member of the group. For reinsurance ceded under reinsurance agreements with an inception, amendment or renewal date on or before December 31, 1992, the reinsurer shall maintain in a trusteed account funds in amount not less than the respective underwriter’s several insurance and reinsurance liabilities attributable to business written in the United States. and, in In addition, the group maintains a trusteed surplus of which $100,000,000 shall be held jointly for the benefit of United States ceding insurers of any member of the group; the incorporated members of the group are not engaged in any business other than underwriting as a member of the group and are subject to the same level of solvency regulation and control by the group's domiciliary regulator as are the unincorporated members; and the group makes available to the commissioner or equivalent official of the ceding licensed insurer's state of domicile or entry an annual certification of the solvency of each underwriter by the group's domiciliary regulator and its independent public accountants. For a domestic insurer, the certification shall be filed with the commissioner by June 1 unless otherwise approved in writing by the commissioner.
Section 1.
SECTION 6. Ins 52.02 (4) (e) 7. is created to read:
Ins 52.02(4)(e)7. Notwithstanding any other provision of the trust instrument, if the trust fund is inadequate because it contains an amount less than the amount required by this subsection or if the grantor of the trust has been declared insolvent or placed into receivership, rehabilitation, liquidation or similar proceedings under the laws of its state or country of domicile, the trustee shall comply with an order of the commissioner with regulatory oversight over the trust or with an order of a court of competent jurisdiction directing the trustee to transfer to the commissioner with regulatory oversight over the trust or other designated receiver all of the assets of the trust fund. The assets shall be distributed by and claims shall be filed with and valued by the commissioner with regulatory oversight over the trust in accordance with the laws of the state in which the trust is domiciled applicable to the liquidation of domestic insurance companies. If the commissioner with regulatory oversight over the trust determines the assets of the trust fund or any part thereof are not necessary to satisfy the claims of the U.S. beneficiaries of the trust, the commissioner with regulatory oversight over the trust shall return the assets to the trustee for distribution in accordance with the trust agreement. The grantor shall waive any right otherwise available to it under US law that is inconsistent with this provision.
SECTION 7. Ins 52.02(4)(f) created to read:
Ins 52.02(4)(f) If the commissioner has principal regulatory oversight of the trust, at any time after the assuming insurer has permanently discontinued writing new business for at least three years, the commissioner may authorize a reduction in the required trusteed surplus, but only after finding, based on an assessment of the risk, that the new required surplus level is adequate for the protection of U.S. ceding insurers, policyholders and claimants. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and shall consider all material risk factors, including when applicable the lines of business involved, the stability of incurred loss estimates and the effect of the surplus requirements on the assuming insurer’s liquidity or solvency. The minimum required trusteed surplus may not be reduced to an amount less than thirty percent (30%) of the assuming insurer’s liabilities attributable to reinsurance ceded by U.S. ceding insurers.
SECTION 8. Ins 52.02(4m) is created to read:
Ins 52.02(4m) The reinsurance is ceded to an assuming insurer that has been certified by the commissioner as a reinsurer in this state and secures its obligations in accordance with the requirements of this subsection.
(a) In order to be eligible for certification, the assuming insurer shall meet the following requirements:
1. The assuming insurer must be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction, as determined by the commissioner pursuant to paragraph (c) of this subsection.
2. The assuming insurer must maintain minimum capital and surplus, or its equivalent, of not less than $250,000,000. This requirement may also be satisfied by a group including incorporated and individual unincorporated underwriters having minimum capital and surplus equivalents, net of liabilities, of at least $250,000,000 and central fund containing a balance of at least $250,000,000. For certified reinsurers not domiciled in the U.S., minimum capital and surplus shall be determined on a U.S. GAAP basis.
3. The assuming insurer must apply for certification and maintain current financial strength rating from two or more approved rating agencies. Approved rating agencies include Fitch Investor Service, Inc., Standard & Poor’s Corporation, Moody’s Investors Service, Inc., and A.M. Best Company. The commissioner shall assign a rating to each certified reinsurer and publish a list of all certified reinsurers and their ratings. The commissioner shall post notice on the office’s website promptly upon receipt of any application of certification including instructions on how members of the public may comment on the application. The commissioner shall issue a written notice to an assuming insurer no sooner than 30 days after receipt of the application indicating whether the assuming insurer has been approved for certification. If approved as a certified reinsurer, the notice shall include the rating assigned by the commissioner in accordance with this subdivision. Each certified reinsurer shall be rated on a legal entity basis, with consideration given to the group rating when the commissioner deems appropriate, except that a group including incorporated and individual unincorporated underwriters that has been approved to do business as a single certified reinsurer may be evaluated on the basis of its group rating. Factors that may be considered as part of the rating process include the following:
a. The certified reinsurer’s financial strength rating from an approved rating agency. The maximum rating that a certified reinsurer may be assigned will correspond to its financial strength rating as outlined in the table that follows. The commissioner shall use the lowest financial strength rating received from an approved rating agency in establishing the maximum rating of a certified reinsurer. A failure to obtain or maintain at least two financial strength ratings from approved rating agencies will result in the loss of eligibility for certification.
