THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY MICOZZIE, DeLUCA, KILLION, TOBASH, D. COSTA, FABRIZIO, BOYD, GODSHALL, KOTIK, SONNEY, PASHINSKI, QUINN AND BARBIN, JUNE 5, 2012

REFERRED TO COMMITTEE ON INSURANCE, JUNE 5, 2012  

AN ACT

Amending the act of May 17, 1921 (P.L.682, No.284), entitled "An

act relating to insurance; amending, revising, and

consolidating the law providing for the incorporation of

insurance companies, and the regulation, supervision, and

protection of home and foreign insurance companies, Lloyds

associations, reciprocal and inter-insurance exchanges, and

fire insurance rating bureaus, and the regulation and

supervision of insurance carried by such companies,

associations, and exchanges, including insurance carried by

the State Workmen's Insurance Fund; providing penalties; and

repealing existing laws," further providing for reinsurance

credits.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 319.1 of the act of May 17, 1921

(P.L.682, No.284), known as The Insurance Company Law of 1921,

amended December 18, 1992 (P.L.1519, No.178), is amended to

read:

Section 319.1.  Reinsurance Credits.--(a)  Unless an

unlicensed reinsurer is qualified or certified to accept

reinsurance from insurers licensed in this Commonwealth, no

credit shall be allowed as an admitted asset or as a reduction

of liability relative to risks ceded by such licensed insurers.

Qualified or certified reinsurers are those meeting the

conditions for reinsurers specified by the commissioner, in his

discretion, and included on a list of qualified or certified 

reinsurers published and periodically reviewed by said

commissioner.

(b)  A reduction from liability for the reinsurance ceded by

a domestic insurer to an assuming insurer which is not a

qualified or certified reinsurer in accordance with this section

shall be allowed in an amount not exceeding the liabilities

carried by the ceding insurer and such reduction shall be in the

amount of funds held by or on behalf of the ceding insurer,

including funds held in trust for the ceding insurer, under a

reinsurance contract with such assuming insurer as security for

the payment of obligations thereunder, if such security is held

in the United States subject to withdrawal solely by and under

the exclusive control of the ceding insurer or, in the case of a

trust, held in a qualified United States financial institution,

as defined in subsection (g)(2). This security may be in the

form of:

(1)  Cash.

(2)  Securities listed by a securities valuation office of a

national association of insurance commissioners or any successor

thereto, including those exempted from filing under the Purposes

and Procedures Manual of the Securities Valuation Office of the

National Association of Insurance Commissioners, and qualifying

as admitted assets.

(3)  (i)  Clean, irrevocable, unconditional and evergreen

letters of credit issued or confirmed by a qualified United

States financial institution, as defined in subsection (g)(1),

no later than the thirty-first day of December in respect of the

year for which filing is being made and in the possession of the

ceding [company] insurer on or before the filing date of its

annual statement.

(ii)  Letters of credit meeting applicable standards of

issuer acceptability as of the dates of their issuance or

confirmation shall, notwithstanding the issuing or confirming

institution's subsequent failure to meet applicable standards of

issuer acceptability, continue to be acceptable as security

until their expiration, extension, renewal, modification or

amendment, whichever first occurs.

(4)  Funds or letters of credit provided by a noninsurer

parent corporation of the ceding insurer, in lieu of the funds

to be withheld by the ceding insurer under a reinsurance

contract with such assuming insurer as security for payment of

obligations thereunder, if the following requirements are met:

(i)  The funds or letters of credit are held subject to

withdrawal by and under the control of the ceding insurer.

(ii)  The type, amount and form of the funds or letters of

credit receive the prior approval of the Insurance Commissioner.

(5)  Any other form of security acceptable to the Insurance

Commissioner.

(c)  No credit shall be allowed as an admitted asset or as a

deduction from liability, to any ceding company for reinsurance

unless the reinsurance is payable to such company or its

statutory liquidator by the assuming company on the basis of the

liability of the ceding company under contract or contracts

reinsured without diminution because of insolvency of the ceding

company.

(d)  No such credit shall be allowed for reinsurance unless

the reinsurance agreement provides that payment by the company

shall be made directly to the ceding company or to its

liquidator, receiver, or statutory successor.

(e)  No credit shall be allowed as an admitted asset or as a

reduction in liability if the gross reserves established by the

ceding insurer do not include provision for the policy benefits

against which the ceding insurer is being indemnified by the

reinsurer.

(f)  Notwithstanding the provisions of this section, the

Insurance Department may promulgate one or more regulations to

limit, prohibit or authorize the credit which a domestic insurer

may take as an admitted asset or as a reduction in liability

with respect to reinsurance ceded on any financial statements

filed with the Insurance Department.

(f.1)  Credit for reinsurance ceded to a certified insurer is

allowed only for reinsurance contracts entered into or renewed

on or after the effective date of the certification of the

assuming insurer by the Insurance Commissioner.

(g)  (1)  The term "qualified United States financial

institution" when used in this section means an institution

which meets the following qualifications:

(i)  Is organized or, in the case of a United States office

of a foreign banking organization, licensed under the laws of

the United States or any state thereof.

(ii)  Is regulated, supervised and examined by United States

Federal or state authorities having regulatory authority over

banks and trust companies.

(iii)  Has been determined by either the Insurance

Commissioner or the Securities Valuation Office of the National

Association of Insurance Commissioners or a successor thereto to

meet such standards of financial condition and standing as are

considered necessary and appropriate to regulate the quality of

financial institutions whose letters of credit will be

acceptable to the Insurance Commissioner.

(2)  The term "qualified United States financial institution"

also means, for the purposes of the provisions of this act

specifying those institutions that are eligible to act as a

fiduciary of a trust, an institution that meets the following

qualifications:

(i)  Is organized or, in the case of a United States branch

or agency office of a foreign banking organization, licensed

under the laws of the United States or any state thereof and has

been granted authority to operate with fiduciary powers.

(ii)  Is regulated, supervised and examined by Federal or

state authorities having regulatory authority over banks and

trust companies.

Section 2.  This act shall take effect immediately.