LRB-2454/1
PJK:jld:jf
2003 - 2004 LEGISLATURE
May 1, 2003 - Introduced by Representatives Ladwig, Weber, Ainsworth, Hahn,
Hines, Huber, Petrowski, Schooff, Townsend, Van Roy, Vruwink
and
Wieckert, cosponsored by Senators Schultz, Breske, Cowles, Decker,
Hansen
and Roessler. Referred to Committee on Insurance.
AB311,1,3 1An Act to renumber and amend 645.58 (1); and to create 645.58 (1) (a) and
2645.58 (1) (b) of the statutes; relating to: reduction in amount recoverable by
3a liquidator from a reinsurer.
Analysis by the Legislative Reference Bureau
Current law provides that, regardless of any provision in a reinsurance
contract, the amount recoverable by a liquidator from the reinsurer of an insurer
(ceding insurer) subject to delinquency proceedings is not reduced as a result of the
delinquency proceedings, and that no payment made directly to an insured or other
creditor reduces the reinsurer's obligation to the ceding insurer's estate except when
the reinsurance contract provides for direct coverage of a named insured and
payment is made in discharge of that obligation.
This bill clarifies when the amount recoverable by a liquidator from a reinsurer
of a ceding insurer is reduced. Those situations are: 1) when the reinsurance
contract specifically provides for another payee in the event of delinquency
proceedings, the reinsurer pays the other payee, and the payment extinguishes the
liability of the ceding insurer to the extent of the payment made by the reinsurer; and
2) when the reinsurer has assumed policy obligations of the ceding insurer as direct
obligations of the reinsurer, the reinsurer makes payment with respect to those

obligations, and the assumption extinguishes the liability of the ceding insurer to the
extent assumed.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB311, s. 1 1Section 1. 645.58 (1) of the statutes is renumbered 645.58 (1) (intro.) and
2amended to read:
AB311,2,103 645.58 (1) Liability. (intro.) The Except as provided in this subsection, the
4amount recoverable by the liquidator from a reinsurer shall not be reduced as a
5result of delinquency proceedings, regardless of any provision in the reinsurance
6contract or other agreement. Payment made directly to an insured or other creditor
7shall not diminish the reinsurer's obligation to the insurer's estate except when the
8reinsurance contract provided for direct coverage of an individual named insured
9and the payment was made in discharge of that obligation.
any of the following
10applies:
AB311, s. 2 11Section 2. 645.58 (1) (a) of the statutes is created to read:
AB311,2,1612 645.58 (1) (a) The reinsurance contract or other agreement specifically
13provides for another payee of the reinsurance in the event of delinquency
14proceedings, payment is made to the other payee, and the payment operates to
15extinguish the liability of the ceding insurer to the extent of the payment made by
16the reinsurer.
AB311, s. 3 17Section 3. 645.58 (1) (b) of the statutes is created to read:
AB311,2,2118 645.58 (1) (b) The reinsurer has assumed policy obligations of the ceding
19insurer as direct obligations of the reinsurer, payment is made to the payees under
20the policies, and the assumption operates to extinguish the liability of the ceding
21insurer to the extent assumed.
AB311, s. 4
1Section 4. Initial applicability.
AB311,3,32 (1) This act first applies with respect to reinsurance contracts or other
3agreements entered into on the effective date of this subsection.
AB311,3,44 (End)
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