Reinsurance Focus

Activity in the various State Legislatures highlights our latest updates on legislative developments in the areas of reinsurance and captive insurers.

State Reinsurance: Tennessee SB 2863 (bill text and bill summary), signed by the Governor on April 5, 2010, makes numerous changes and clarifications concerning the authority and responsibility of the Tennessee Life and Health Guaranty Association. The bill, as it relates to reinsurance, amends Section 56-12-207 of the Tennessee Code to authorize the Guaranty Association to elect to succeed to the rights of the insolvent insurer regarding any reinsurance agreement to the extent that such agreement provides coverage for losses occurring after the date of the order of liquidation or rehabilitation. This provision seems to give a preference to the Guaranty Association contrary to the basic concept and structure of the rehabilitation and liquidation process. It became effective on April 12, 2010.

Louisiana HB 1326 proposes, in addition to the policy take-out program authorized by present law, to authorize the Louisiana Citizens Property Insurance Corporation (Corporation) to transfer residential and commercial property insurance policies to domestic insurers licensed to write property insurance in Louisiana via reinsurance of those policies to be taken out of the Corporation. The bill provides that the reinsurance may be facilitated by property insurance companies domiciled in Louisiana and licensed by the Louisiana Department of Insurance (DOI). The proposed legislation is designed to facilitate the transfer of risk from the Corporation to the voluntary insurance market, and that the Corporation and DOI are given broad latitude to effectuate these reinsurance programs with all deliberate speed in order to achieve the intent of the legislation. The bill was introduced on April 19, 2010, and referred the next day to the Committee on Insurance.

Maryland HB 305, signed by the Governor on April 13, 2010, amends the state’s domestic reinsurance law requirements by: (1) specifying an assessment fee payable by specified domestic reinsurers to the Maryland Insurance; (2) exempting domestic reinsurers from a requirement to have an office in the State; (3) requiring domestic reinsurers to keep specified assets in the State; and (4) authorizing domestic reinsurers to keep their general ledger account records outside the State under specified circumstances. The amendments become effective June 1, 2010.

Kansas HB 2500, signed by the Governor on April 12, 2010 amends the Kansas Municipal Group-Funded Pool Act to allow municipal insurance pool applicants to submit a confirmation that reinsurance approved by the Insurance Commission is in effect or will be effective at the time the pool assumes risk. The bill takes effect upon its publication in the Kansas Statute Book.

State Captive Insurers: Delaware enacted HB 314 (mentioned in our February 8, 2010 posting), which amends the state’s captive insurance company laws by adding two new forms of captive insurance companies, “agency captive insurance companies” and “branch captive insurance companies,” to those that can currently be licensed in Delaware. The legislation was passed by the Delaware House in March 2010 and by the Delaware Senate in April 2010, subject to an amendment introduced by the Senate, which requires the Insurance Commissioner to make a finding that a “branch captive” insurer is financially stable in order to exempt the insurer from the minimum capital and surplus requirements and reserve requirements of the State insurance law.

This post written by Karen Benson.