HOUSE AMENDED
PRIOR PRINTER'S NO. 853 PRINTER'S NO. 2133
No. 745 Session of 1985
INTRODUCED BY ZEMPRELLI, SALVATORE, HOPPER, KELLEY, LYNCH,
LEWIS, SCANLON, MOORE, FUMO, MADIGAN, CORMAN, LOEPER, PECORA,
SHUMAKER, JUBELIRER, STAUFFER AND HOLL, APRIL 19, 1985
AS REPORTED FROM COMMITTEE ON INSURANCE, HOUSE OF
REPRESENTATIVES, AS AMENDED, MAY 6, 1986
AN ACT
1 Amending the act of June 11, 1947 (P.L.538, No.246), entitled <--
2 "An act relating to the regulation of rates for insurance
3 which may be written by stock or mutual casualty insurance
4 companies, associations or exchanges, including fidelity,
5 surety and guaranty bonds and all other forms of motor
6 vehicle insurance, and title insurance; to rating and
7 advisory organizations; conferring on the Insurance
8 Commissioner the power and duty of supervising and regulating
9 persons, associations, companies and corporations, and of
10 enforcing the provisions of this act; prescribing and
11 regulating the practice and procedure before the
12 commissioner, and procedure for review by the courts; giving
13 the Court of Common Pleas of Dauphin County exclusive
14 jurisdiction over certain proceedings; prescribing penalties
15 and providing for enforcement thereof, and repealing
16 inconsistent acts," further providing for ratemaking.
17 AMENDING THE ACT OF MAY 17, 1921 (P.L.789, NO.285), ENTITLED, AS <--
18 AMENDED, "AN ACT RELATING TO INSURANCE; ESTABLISHING AN
19 INSURANCE DEPARTMENT; AND AMENDING, REVISING, AND
20 CONSOLIDATING THE LAW RELATING TO THE LICENSING,
21 QUALIFICATION, REGULATION, EXAMINATION, SUSPENSION, AND
22 DISSOLUTION OF INSURANCE COMPANIES, LLOYDS ASSOCIATIONS,
23 RECIPROCAL AND INTER-INSURANCE EXCHANGES, AND CERTAIN
24 SOCIETIES AND ORDERS, THE EXAMINATION AND REGULATION OF FIRE
25 INSURANCE RATING BUREAUS, AND THE LICENSING AND REGULATION OF
26 INSURANCE AGENTS AND BROKERS; THE SERVICE OF LEGAL PROCESS
27 UPON FOREIGN INSURANCE COMPANIES, ASSOCIATIONS OR EXCHANGES;
28 PROVIDING PENALTIES, AND REPEALING EXISTING LAWS," FURTHER
29 PROVIDING FOR ADMITTED ASSETS.
30 The General Assembly of the Commonwealth of Pennsylvania
1 hereby enacts as follows:
2 Section 1. Section 3 of the act of June 11, 1947 (P.L.538, <--
3 No.246), known as The Casualty and Surety Rate Regulatory Act,
4 is amended to read:
5 Section 3. Making of Rates.--All rates shall be made in
6 accordance with the following provisions:
7 (a) Due consideration shall be given to past and prospective
8 loss experience within and outside this Commonwealth, to
9 physical hazards, to safety and loss prevention factors, to
10 underwriting practice and judgment to the extent appropriate, to
11 catastrophe hazards, if any, to a reasonable margin for
12 underwriting profit and contingencies, to dividends, savings or
13 unabsorbed premium deposits allowed or returned by insurers to
14 their policyholders, members or subscribers, to past and
15 prospective expenses both country wide and those specially
16 applicable to this Commonwealth, and to all other relevant
17 factors within and outside this Commonwealth;
18 (b) The systems of expense provisions included in the rates
19 for use by any insurer or group of insurers may differ from
20 those of other insurers or groups of insurers to reflect the
21 requirements of the operating methods of any such insurer or
22 group with respect to any kind of insurance, or with respect to
23 any subdivision or combination thereof for which subdivision or
24 combination separate expense provisions are applicable;
25 (c) Risks may be grouped by classifications for the
26 establishment of rates and minimum premiums. Classification
27 rates may be modified to produce rates for individual risks in
28 accordance with rating plans which establish standards for
29 measuring variations in hazards or expense provisions, or both.
30 Such standards may measure any differences among risks that can
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1 be demonstrated to have a probable effect upon losses or
2 expenses;
3 (d) Rates shall not be excessive, inadequate or unfairly
4 discriminatory. No rate shall be held to be unfairly
5 discriminatory unless, allowing for practical limitations, it
6 clearly fails to reflect with reasonable accuracy the
7 differences in expected losses and expenses. A rate is not
8 unfairly discriminatory because different premiums result for
9 policyholders with like loss exposures but different expense
10 factors, so long as the rate reflects the differences with
11 reasonable accuracy. A rate is not unfairly discriminatory if it
12 is averaged broadly among persons insured under a group,
13 franchise or blanket policy.
14 (e) This section shall not be construed to prohibit rates
15 for automobile insurance which are based in whole or in part on
16 factors including, but not limited to, sex, if the use of such a
17 factor is supported by sound actuarial principles or is related
18 to actual or reasonably anticipated experience.
19 Section 2. This act shall take effect in 60 days.
20 SECTION 1. SUBPARAGRAPH (3) OF THE DEFINITION OF <--
21 "INSOLVENCY" IN SECTION 503 OF THE ACT OF MAY 17, 1921 (P.L.789,
22 NO.285), KNOWN AS THE INSURANCE DEPARTMENT ACT OF ONE THOUSAND
23 NINE HUNDRED AND TWENTY-ONE, ADDED DECEMBER 14, 1977 (P.L.280,
24 NO.92), IS AMENDED TO READ:
25 SECTION 503. DEFINITIONS.--THE FOLLOWING WORDS AND PHRASES
26 WHEN USED IN THIS ACT SHALL HAVE, UNLESS THE CONTEXT CLEARLY
27 INDICATES OTHERWISE, THE MEANINGS GIVEN TO THEM IN THIS SECTION:
28 * * *
29 "INSOLVENCY" MEANS:
30 * * *
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1 (3) FOR THE PURPOSES OF THIS PARAGRAPH IN DETERMINING THE
2 FINANCIAL CONDITION OF AN INSURER SUCH ASSETS SHALL BE
3 CONSIDERED TO BE ADMITTED AS ARE OWNED BY THE INSURER AND WHICH
4 CONSIST OF: (I) CASH IN THE POSSESSION OF THE INSURER, OR IN
5 TRANSIT UNDER ITS CONTROL, AND INCLUDING THE TRUE BALANCE OF ANY
6 DEPOSIT IN A SOLVENT BANK OR TRUST COMPANY; (II) INVESTMENTS,
7 SECURITIES, PROPERTIES AND LOANS ACQUIRED OR HELD IN ACCORDANCE
8 WITH THIS ACT, AND IN CONNECTION THEREWITH THE FOLLOWING ITEMS:
9 (A) INTEREST DUE OR ACCRUED ON ANY BOND OR EVIDENCE OF
10 INDEBTEDNESS WHICH IS NOT IN DEFAULT AND WHICH IS NOT VALUED ON
11 A BASIS INCLUDING ACCRUED INTEREST, (B) DECLARED AND UNPAID
12 DIVIDENDS ON STOCK AND SHARES, UNLESS SUCH AMOUNT HAS OTHERWISE
13 BEEN ALLOWED AS AN ASSET, (C) INTEREST DUE OR ACCRUED UPON A
14 COLLATERAL LOAN IN AN AMOUNT NOT TO EXCEED ONE YEAR'S INTEREST
15 THEREON, (D) INTEREST DUE OR ACCRUED ON DEPOSITS IN SOLVENT
16 BANKS AND TRUST COMPANIES, AND INTEREST DUE OR ACCRUED ON OTHER
17 ASSETS, IF SUCH INTEREST IS IN THE JUDGMENT OF THE COMMISSIONER
18 A COLLECTIBLE ASSET, (E) INTEREST DUE OR ACCRUED ON A MORTGAGE
19 LOAN, IN AN AMOUNT NOT EXCEEDING IN ANY EVENT THE AMOUNT, IF
20 ANY, OF THE EXCESS OF THE VALUE OF THE PROPERTY LESS DELINQUENT
21 TAXES THEREON OVER THE UNPAID PRINCIPAL, BUT IN NO EVENT SHALL
22 INTEREST ACCRUED FOR A PERIOD IN EXCESS OF TWELVE MONTHS BE
23 ALLOWED AS AN ASSET, (F) RENT DUE OR ACCRUED ON REAL PROPERTY IF
24 SUCH RENT IS NOT IN ARREARS FOR MORE THAN THREE MONTHS, AND RENT
25 MORE THAN THREE MONTHS IN ARREARS IF THE PAYMENT OF SUCH RENT BE
26 ADEQUATELY SECURED BY PROPERTY HELD IN THE NAME OF THE TENANT
27 AND CONVEYED TO THE INSURER AS COLLATERAL, (G) THE UNACCRUED
28 PORTION OF TAXES PAID PRIOR TO THE DUE DATE ON REAL PROPERTY;
29 (III) PREMIUM NOTES, POLICY LOANS, AND OTHER POLICY ASSETS AND
30 LIENS ON POLICIES AND CERTIFICATES OF LIFE INSURANCE AND ANNUITY
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1 CONTRACTS AND ACCRUED INTEREST THEREON, IN AN AMOUNT NOT
2 EXCEEDING THE LEGAL RESERVE AND OTHER POLICY LIABILITIES CARRIED
3 ON EACH INDIVIDUAL POLICY; (IV) THE NET AMOUNT OF UNCOLLECTED
4 AND DEFERRED PREMIUMS AND ANNUITY CONSIDERATION IN THE CASE OF A
5 LIFE INSURER; (V) PREMIUMS IN THE COURSE OF COLLECTION, OTHER
6 THAN FOR LIFE INSURANCE, NOT MORE THAN THREE MONTHS PAST DUE,
7 LESS COMMISSIONS PAYABLE THEREON. THE FOREGOING LIMITATION SHALL
8 NOT APPLY TO PREMIUMS PAYABLE DIRECTLY OR INDIRECTLY BY THE
9 UNITED STATES GOVERNMENT OR BY ANY OF ITS INSTRUMENTALITIES;
10 (VI) INSTALLMENT PREMIUMS OTHER THAN LIFE INSURANCE PREMIUMS TO
11 THE EXTENT OF THE UNEARNED PREMIUM RESERVE CARRIED ON THE POLICY
12 TO WHICH SUCH PREMIUMS APPLY; (VII) NOTES AND LIKE WRITTEN
13 OBLIGATIONS NOT PAST DUE, TAKEN FOR PREMIUMS OTHER THAN LIFE
14 INSURANCE PREMIUMS, ON POLICIES PERMITTED TO BE ISSUED ON SUCH
15 BASIS, TO THE EXTENT OF THE UNEARNED PREMIUM RESERVES CARRIED
16 THEREON; (VIII) THE FULL AMOUNT OF REINSURANCE RECOVERABLE BY A
17 CEDING INSURER FROM A SOLVENT REINSURER AND WHICH REINSURANCE IS
18 AUTHORIZED UNDER SECTION 319 OF THE ACT OF MAY 17, 1921
19 (P.L.682, NO.284), KNOWN AS "THE INSURANCE COMPANY LAW OF 1921";
20 (IX) AMOUNTS RECEIVABLE BY AN ASSUMING INSURER REPRESENTING
21 FUNDS WITHHELD BY A SOLVENT CEDING INSURER UNDER A REINSURANCE
22 TREATY; (X) DEPOSITS OR EQUITIES RECOVERABLE FROM UNDERWRITING
23 ASSOCIATIONS, SYNDICATES AND REINSURANCE FUNDS, OR FROM A
24 SUSPENDED BANKING INSTITUTION, TO THE EXTENT DEEMED BY THE
25 COMMISSIONER AVAILABLE FOR THE PAYMENT OF LOSSES AND CLAIMS AND
26 AT VALUES TO BE DETERMINED BY HIM; (XI) ELECTRONIC AND
27 MECHANICAL MACHINES CONSTITUTING A DATA PROCESSING AND
28 ACCOUNTING SYSTEM IF THE COST OF SUCH SYSTEM IS AT LEAST [ONE
29 HUNDRED THOUSAND DOLLARS ($100,000)] TEN THOUSAND DOLLARS
30 ($10,000), WHICH COST SHALL BE AMORTIZED IN FULL OVER A PERIOD
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1 NOT TO EXCEED TEN CALENDAR YEARS; (XII) ALL ASSETS, WHETHER OR
2 NOT CONSISTENT WITH THE PROVISIONS OF THIS SECTION, AS MAY BE
3 ALLOWED PURSUANT TO THE ANNUAL STATEMENT FORM APPROVED BY THE
4 COMMISSIONER FOR USE IN THIS COMMONWEALTH FOR THE KINDS OF
5 INSURANCE TO BE REPORTED UPON THEREIN; (XIII) OTHER ASSETS, NOT
6 INCONSISTENT WITH THE PROVISIONS OF THIS SECTION, DEEMED BY THE
7 COMMISSIONER TO BE AVAILABLE FOR THE PAYMENT OF LOSSES AND
8 CLAIMS, AT VALUES TO BE DETERMINED BY HIM.
9 * * *
10 SECTION 2. THIS ACT SHALL TAKE EFFECT IMMEDIATELY.
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