Reinsurance Regulation

Vermont has amended its law governing how ceding insurers take credit for reinsurance within the state. The law, in part, implements new eligibility requirements for assuming insurers to be accredited reinsurers and requires ceding insurers to take certain steps to manage their concentration of risk. It also imposes certain requirements upon the insolvency of a non-U.S. insurer or reinsurer that provides security to fund its U.S. obligations. The Governor signed the act into law on May 9, 2014, and the amendments were effective upon passage. 8 V.S.A. Sec. 3634a.

This post written by Renee Schimkat.

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On May 15, 2014, the Utah Insurance Department and Surplus Line Association of Utah issued Bulletin 2014-5 to all surplus lines insurers and surplus lines producers/brokers informing them of the following changes by the Utah legislature for policies issued or renewed in Utah after May 13, 2014:

• Insurers who wish to audit a surplus lines policy must initiate the audit within six months after the expiration of the term for which the premium is paid and must complete the audit within three years after the surplus lines insurance transaction expires. The failure to meet either of these requirements will preclude the insurer from charging premiums in excess of the terms of the original policy.
• A surplus lines insurer may not count as earned premium an amount in excess of 50% of the initial premium until the earlier of (1) the completion of the audit; or (2) the term for which the auditable policy was written has expired and the time to conduct an audit has passed.
• If an audit is conducted, the insured is entitled to a refund if the actual exposure is less than the estimated exposure. The insured may request such an audit and the insurer will be bound by the insured’s statement of exposure, requiring refund of the excess portion of the premium, if the insurer does not conduct the audit as required by this law.
• Alternatively, if the risk is determined to be greater than the initial estimate upon a timely audit, the insurer is entitled to additional premium.

These new laws apply to the extent they are not pre-empted by federal law.

This post written by Leonor Lagomasino.

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Vermont has amended its captive insurer statute (H. 563) to permit a  company to elect a “dormant captive insurance company” status for a period of five years (renewable) if it meets certain criteria: (1) unimpaired, paid-in capital and surplus of not less than $25,000; (2) submission of a prescribed annual report; and (3) payment of a license renewal fee.  Dormant companies are those which: (1) do not insure controlled unaffiliated business; (2) have ceased transacting the business of insurance (including the issuance of insurance policies); and (3) have no remaining liabilities associated with insurance business transactions or outstanding insurance policies.  Dormant companies are not liable for certain premium taxes.

This post written by Rollie Goss.

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Connecticut has amended its law concerning captive insurers doing business in the state to include, in part, a new provision on how foreign captive insurers can become Connecticut domestic companies and revisions on how captive insurers can take credit for certain reinsurance risk. The law defines a “captive insurer” as “an insurance company owned by another organization whose exclusive purpose is to insure risks of the parent organization and affiliated companies or, in the case of groups and associations, an insurance organization owned by the insureds whose exclusive purpose is to insure risks of member organizations and group members and their affiliates.” The changes to the law become effective October 1, 2014. Conn. Sub. Senate Bill No. 188, Public Act No. 14-6.

This post written by Renee Schimkat.

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Tennessee’s governor signed into law a repeal of that state’s previously-passed enabling legislation, which allowed it to join the Surplus Lines Insurance Multi-State Compliance Compact (“SLIMPACT”). SLIMPACT was one of the two models proposed by various states in response to the invitation and recommendation to do so set forth in the Non-Admitted and Reinsurance Reform Act (“NRRA”) as part of the omnibus Dodd-Frank financial regulation overhaul passed by Congress in 2010. SLIMPACT is an interstate compact created for the purpose of allowing states to take advantage of shared administration of data, record-keeping, and premium tax allocation. Tennessee was the last state to join, which it did in June, 2011, becoming the ninth state. By its terms, SLIMPACT was slated to become effective once ten states joined. However, its future is now in doubt as it moved farther away from its ten-state goal, after stalling at nine states for the last three years. The repeal bill, Tennessee Senate Bill 356, was signed into law on April 4, 2014, and repeals Section 56-14-201 of the Tennessee Code. The bill becomes effective July 1, 2014.

This post written by John Pitblado.

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