It's state legislative session time of the year again – time to review what is going on in the state legislatures and insurance departments relating to reinsurance. This year there is considerable activity in three areas: (1) captive insurance companies; (2) catastrophe funds; and (3) reinsurance credit issues.
- Captive insurers: Connecticut General Assembly Bill No. 281 would allow captive insurance companies to be licensed and domiciled in Connecticut. HB 2151, pending in the Hawaii House, would authorize medical malpractice captive insurance companies. Hawaii Senate Bill No. 3023 would authorize the creation and regulation of special purpose financial captive insurance companies. Hawaii HB No. 3101 is a House version of SB 3023. Michigan SB No. 1061, which has been passed and sent to the governor (bill text; bill analysis), would authorize the formation of captive insurance companies in Michigan, including special purpose financial captives for purposes of securitizations. The Missouri Insurance Department has proposed regulations containing requirements for the financial management and control of captives. New Jersey Assembly Bill No. 1580 would authorize and regulate captives. Utah HB 55 would modify Utah's Captive Insurance Companies Act and enact the Special Purpose Financial Captive Insurance Company Act.
- Catastrophe funds: Five states have actions pending in this area. There is a bill pending in the Alabama Senate (SB 5) which would establish a coastal insurance authority and cat fund for wind and flood insurance for both residential and commercial property along the Gulf and authorize certain coverages by captive insurers. A bill is pending in the Connecticut General Assembly (No. 167) which would direct the Insurance Commissioner to study the feasibility of establishing a cat fund to offer reinsurance to the private insurance market. HB 1918 (bill text; bill summary), pending in the Missouri House, would create a cat fund for residential property earthquake risks. The fund would reimburse member insurers for a portion of losses paid by the insurers. The Insurance Department would be authorized to issue bonds to support the fund. Senate Bill No. 249, pending in the New Jersey Senate, would create a catastrophic health care claim reinsurance program. New Jersey Assembly Bill No. 2198 would create a state cat fund and fund it at an initial $10 million level. Virginia Senate Bill No. 318 would create a wind joint underwriting association to cover coastal areas.
- Reinsurance credit: The Utah legislature has adopted a bill (SB 143) (which is awaiting action by the governor) which modifies a number of financial requirements relating to insurers and insurance products, including when domestic and foreign ceding insurers are allowed credit for reinsurance. It also addresses requirements for assumption agreements and reinsurance contracts and grants rulemaking authority on reinsurance credit issues.
This post written by Rollie Goss.