S1464B2205A11076     JKL:JB  06/04/12     #90        A11076

  

  

  

  

AMENDMENTS TO SENATE BILL NO. 1464

Printer's No. 2205

  

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Amend Bill, page 1, line 11, by inserting after "providing"

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for reinsurance credits, 

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Amend Bill, page 1, lines 23 through 27, by striking out all

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of said lines and inserting

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

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

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

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read:

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

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unlicensed reinsurer is qualified or certified to accept

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reinsurance from insurers licensed in this Commonwealth, no

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

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of liability relative to risks ceded by such licensed insurers.

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Qualified or certified reinsurers are those meeting the

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conditions for reinsurers specified by the commissioner, in his

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discretion, and included on a list of qualified or certified 

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reinsurers published and periodically reviewed by said

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commissioner.

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

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a domestic insurer to an assuming insurer which is not a

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qualified or certified reinsurer in accordance with this section

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shall be allowed in an amount not exceeding the liabilities

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

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

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

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reinsurance contract with such assuming insurer as security for

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the payment of obligations thereunder, if such security is held

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in the United States subject to withdrawal solely by and under

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

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trust, held in a qualified United States financial institution,

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

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form of:

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(1)  Cash.

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

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national association of insurance commissioners or any successor

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thereto, including those exempted from filing under the Purposes

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and Procedures Manual of the Securities Valuation Office of the

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National Association of Insurance Commissioners, and qualifying

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as admitted assets.

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

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letters of credit issued or confirmed by a qualified United

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

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

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

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

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annual statement.

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(ii)  Letters of credit meeting applicable standards of

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issuer acceptability as of the dates of their issuance or

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confirmation shall, notwithstanding the issuing or confirming

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institution's subsequent failure to meet applicable standards of

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issuer acceptability, continue to be acceptable as security

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until their expiration, extension, renewal, modification or

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amendment, whichever first occurs.

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

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

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to be withheld by the ceding insurer under a reinsurance

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contract with such assuming insurer as security for payment of

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obligations thereunder, if the following requirements are met:

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

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withdrawal by and under the control of the ceding insurer.

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

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credit receive the prior approval of the Insurance Commissioner.

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

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Commissioner.

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

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deduction from liability, to any ceding company for reinsurance

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unless the reinsurance is payable to such company or its

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statutory liquidator by the assuming company on the basis of the

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liability of the ceding company under contract or contracts

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reinsured without diminution because of insolvency of the ceding

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company.

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

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the reinsurance agreement provides that payment by the company

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shall be made directly to the ceding company or to its

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liquidator, receiver, or statutory successor.

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

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reduction in liability if the gross reserves established by the

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ceding insurer do not include provision for the policy benefits

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against which the ceding insurer is being indemnified by the

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reinsurer.

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(f)  Notwithstanding the provisions of this section, the

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Insurance Department may promulgate one or more regulations to

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limit, prohibit or authorize the credit which a domestic insurer

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

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with respect to reinsurance ceded on any financial statements

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filed with the Insurance Department.

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

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is allowed only for reinsurance contracts entered into or

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renewed on or after the effective date of the certification of

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the assuming insurer by the Insurance Commissioner.

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

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institution" when used in this section means an institution

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which meets the following qualifications:

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

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of a foreign banking organization, licensed under the laws of

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the United States or any state thereof.

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

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Federal or state authorities having regulatory authority over

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banks and trust companies.

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(iii)  Has been determined by either the Insurance

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Commissioner or the Securities Valuation Office of the National

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Association of Insurance Commissioners or a successor thereto to

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meet such standards of financial condition and standing as are

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considered necessary and appropriate to regulate the quality of

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financial institutions whose letters of credit will be

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acceptable to the Insurance Commissioner.

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

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

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specifying those institutions that are eligible to act as a

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fiduciary of a trust, an institution that meets the following

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qualifications:

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

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or agency office of a foreign banking organization, licensed

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

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been granted authority to operate with fiduciary powers.

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

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state authorities having regulatory authority over banks and

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trust companies.

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Section 1.1.  The definitions of "control" and "NAIC" in

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section 1401 of the act, added December 18, 1992 (P.L.1519,

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No.178), are amended and the section is amended by adding

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definitions to read:

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Amend Bill, page 36, by inserting between lines 9 and 10

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(1)  The amendment of section 319.1 of the act shall take

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effect immediately.

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Amend Bill, page 36, line 10, by striking out "(1)" and

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inserting

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 (2)

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Amend Bill, page 36, line 12, by striking out "(2)" and

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inserting

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 (3)

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Amend Bill, page 36, line 13, by striking out "(3)" and

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inserting

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 (4)

  

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