PRINTER'S NO. 735
No. 656 Session of 1975
INTRODUCED BY A. K. HUTCHINSON, SCHMITT, GILLETTE, TOLL, COHEN, ROMANELLI AND TRELLO, MARCH 4, 1975
REFERRED TO COMMITTEE ON CONSUMER PROTECTION, MARCH 5, 1975
AN ACT 1 Amending the act of May 17, 1921 (P.L.682, No.284), entitled "An 2 act relating to insurance; amending, revising, and 3 consolidating the law providing for the incorporation of 4 insurance companies, and the regulation, supervision, and 5 protection of home and foreign insurance companies, Lloyds 6 associations, reciprocal and inter-insurance exchanges, and 7 fire insurance rating bureaus, and the regulation and 8 supervision of insurance carried by such companies, 9 associations, and exchanges, including insurance carried by 10 the State Workmen's Insurance Fund; providing penalties; and 11 repealing existing laws," further regulating reinsurance. 12 The General Assembly of the Commonwealth of Pennsylvania 13 hereby enacts as follows: 14 Section 1. Section 319, act of May 17, 1921 (P.L.682, 15 No.284), known as "The Insurance Company Law of 1921," is 16 amended to read: 17 Section 319. Reinsurance Regulated.--(a) No stock or mutual 18 insurance company, association, or exchange, organized under the 19 laws of this Commonwealth, shall reinsure its entire schedule of 20 policies except by approval of the Insurance Commissioner. 21 (b) Any domestic or foreign stock or mutual insurance 22 company, association, or exchange, authorized to transact
1 business in this Commonwealth, may reinsure all or any part of 2 its liability under one or more of its policy contracts with any 3 stock or mutual insurance company, association, or exchange, 4 doing the same or a similar kind of business, authorized to 5 transact business in this Commonwealth [or authorized to 6 transact business in any of the United States, if such company, 7 association, or exchange is and remains of the same standard of 8 solvency and other requirements fixed by the laws of this 9 Commonwealth for companies, associations, or exchanges 10 transacting the same classes of business within this 11 Commonwealth]. Any domestic or foreign stock or mutual insurance 12 company, association, or exchange, authorized to transact 13 business in this Commonwealth, shall pay to this Commonwealth 14 taxes required on all business taxable within this Commonwealth 15 and reinsured, as provided in this section, [with any foreign 16 company, association, or exchange not authorized to transact 17 business in this Commonwealth.] and may take credit for the 18 reserves of each ceded risk to the extent reinsured subject to 19 the exceptions provided in sections 319.1 through 319.3 20 inclusive. 21 Section 2. The act is amended by adding sections to read: 22 Section 319.1. Reinsurer Must Be Authorized to Transact 23 Business in the Commonwealth.--No credit shall be taken for such 24 reserves unless the assuming company accepting the reinsurance 25 is authorized to do business in the Commonwealth of 26 Pennsylvania. 27 Section 319.2. Reserve Credit for Liability Assumed.--No 28 credit shall be allowed as an admitted asset or as a deduction 29 from liability, to any ceding company for reinsurance unless the 30 reinsurance is payable by the assuming company on the basis of 19750H0656B0735 - 2 -
1 the liability of the ceding company under contract or contracts 2 reinsured without diminution because of insolvency of the ceding 3 company. 4 Section 319.3. Payment by the Assuming Company.--No such 5 credit shall be allowed for reinsurance unless the reinsurance 6 agreement provides that payment by the company shall be made 7 directly to the ceding company or to its liquidator, receiver, 8 or statutory successor. 9 Section 319.4. Assuming Company May Defend Claims of 10 Insolvent Ceding Company.--Such reinsurance agreement may 11 provide that the liquidator or receiver of any insolvent ceding 12 company shall give written notice of the pending claims against 13 the insolvent ceding company on the policy or bond reinsured 14 within a reasonable time after such claim is filed in the 15 insolvency proceedings and that during the pendency of such 16 claim any assuming company may investigate such claim and 17 interpose at its own expense in the proceedings where such claim 18 is to be adjudicated, any defense or defenses are considered 19 available to the ceding company or its liquidator or receiver. 20 The expense thus incurred by the assuming company is chargeable 21 against the insolvency of the company as a part of the expense 22 of liquidation to the extent of the proportionate share of the 23 benefit which accrues to the ceding company solely as a result 24 of the defense undertaken by the assuming company. 25 Where two or more assuming companies are involved in the same 26 claim and a majority in interest elect to interpose a defense to 27 such claim, the expenses shall be apportioned in accordance with 28 the terms of the reinsurance agreement as though such expense 29 had been incurred by the ceding company. 30 Section 3. This act shall take effect immediately. A13L37RAW/19750H0656B0735 - 3 -