Ins 3.08(9) (9) Contingency reserve.

Ins 3.08(9)(a) (a) A municipal bond insurer shall establish a contingency reserve which shall consist of allocations of sums representing 50% of the earned premium on policies of municipal bond insurance except as provided under sub. (12).

Ins 3.08(9)(b) (b) The contingency reserve established by this subsection shall be maintained for 240 months. That portion of the contingency reserve established and maintained for more than 240 months shall be released and may no longer constitute part of the contingency reserve except as provided under sub. (12).

Ins 3.08(9)(c) (c) Subject to the approval of the commissioner, withdrawals may be made from the contingency reserve in any year in which the actual incurred losses on municipal bond insurance policies exceed 35% of the earned premiums on municipal bonds insurance policies except as provided under sub. (12).

Ins 3.08(9)(d) (d) A municipal bond insurer may invest the contingency reserve in tax and loss bonds purchased pursuant to 26 USC 832(e). The contingency reserve shall otherwise be invested only in classes of securities or types of investments specified in s. 620.22 (1), Stats., except as provided under sub. (12).

Ins 3.08(10) (10) Conflicts of interest prohibited. No municipal bond insurer may pay any commission or make any gift of money, property or other valuable thing to any employee, agent, or representative of any issuer of municipal bonds or to any employee, agent or representative of any underwriter of any issue of the bonds as an inducement to the purchase of, or at any time there is in force, a policy insuring bonds, and no employee, agent or representative of the insurer or underwriter shall receive any payment or gift. However, violation of the provisions of this subsection does not render void the municipal bond insurance policy.

Ins 3.08(11) (11) Transition. Unearned premium reserves and contingency loss reserves shall be computed and maintained on risks insured after the effective date of this section as required by subs. (8) and (9).

Ins 3.08(12) (12) Laws or regulations of other jurisdictions. Whenever the laws or regulations of another jurisdiction in which a municipal bond insurer is licensed, require a larger unearned premium reserve or a larger contingency reserve in the aggregate than that set forth in this section, the establishment and maintenance of the larger aggregated, unearned premium reserve and contingency reserve complies with this rule.

Ins 3.08 History History: Emerg. cr. eff. 6-5-84; cr. Register, October, 1984, No. 346, eff. 11-1-84; am. (3) (d) intro., (5) (c) and (9) (c), Register, March, 1986, No. 363, eff. 4-1-86; correction in (3) (a) made under s. 13.93 (2m) (b) 7., Stats., Register, July, 1999, No. 523.

Ins 3.09 Ins 3.09 Mortgage guaranty insurance.

Ins 3.09(1) (1) Purpose. This section implements and interprets s. Ins 6.75 (2) (i) and (j) and ss. 601.01, 601.42, 611.19 (1), 611.24, 618.21, 620.02, 623.02, 623.03, 623.04, 623.11, 627.05 and 628.34 (12), Stats., for the purpose of establishing minimum requirements for the transaction of mortgage guaranty insurance.

Ins 3.09(2) (2) Scope. This rule shall apply to the underwriting, investment, marketing, rating, accounting and reserving activities of insurers which write the type of insurance authorized by s. Ins 6.75 (2) (i) and (j).

Ins 3.09(3) (3) Definitions.

Ins 3.09(3)(a) (a) “Amount at risk” means the coverage percentage or the claim settlement option percentage multiplied by the face of amount of a mortgage or by the insured amount of a lease.

Ins 3.09(3)(b) (b) “Annual statement” means the fire and casualty annual statement form specified in s. Ins 7.02, Forms 22-010 and 22-011.

Ins 3.09(3)(c) (c) “Contingency reserve” means the reserve established for the protection of policyholders against the effect of losses resulting from adverse economic cycles.

Ins 3.09(3)(d) (d) “Equity” means the complement of the Loan-to-Value.

Ins 3.09(3)(e) (e) “Face amount” means the entire indebtedness under an insured mortgage before computing any reduction because of an insurer’s option limiting its coverage.

Ins 3.09(3)(f) (f) “Loan-to-value” means the ratio of the entire indebtedness to value of the collateral property expressed as a percentage.

Ins 3.09(3)(g) (g) “Mortgage guaranty account” means the portion of the Contingency Reserve which complies with 26 USC 832 (e) as amended.

Ins 3.09(3)(h) (h) “Mortgage guaranty insurance” means that kind of insurance authorized by s. Ins 6.75 (2) (i).

Ins 3.09(3)(i) (i) “Mortgage guaranty insurer” means an insurer which:

Ins 3.09(3)(i)1. 1. Insures pursuant to s. Ins 6.75 (2) (i), or

Ins 3.09(3)(i)2. 2. Insures pursuant to s. Ins 6.75 (2) (j) against loss arising from failure of debtors to meet financial obligations to creditors under evidences of indebtedness secured by a junior lien or charge on real estate.

Ins 3.09(3)(j) (j) “Mortgage guaranty insurers report of policyholders position” means the annual supplementary report required by s. Ins 7.02, Forms 22-090 and 22-091.

Ins 3.09(3)(k) (k) “NAIC Ratio—Investment Yield” means net investment income earned after taxes from the annual statement divided by mean invested assets.

Ins 3.09(3)(L) (L) “Person” means any individual, corporation, association, partnership or any other legal entity.

Ins 3.09(3)(m) (m) “Policyholders position” includes the contingency reserve established under sub. (14), the deferred risk charge established under sub. (13) (b) and surplus as regards policyholders. “Minimum policyholders position” is calculated as described in sub. (5).

Ins 3.09(3)(n) (n) “Surplus as regards policyholders” means an insurer’s net worth, the difference between its assets and liabilities, as reported in its annual statement.