SECTION 5. Ins 52.01 (1g), (4), and (5) are created to read:
Ins 52.01 (1g) “Covered agreement” means an agreement entered into pursuant to Dodd-Frank Wall Street Reform and Consumer Protection Act, 31 USC 313 and 314, that is currently in effect or in a period of provisional application and addresses the elimination, under specified conditions, of collateral requirements as a condition for entering into any reinsurance agreement with a ceding insurer domiciled in this state or for allowing the ceding insurer to recognize credit for reinsurance. (4) “Reciprocal jurisdiction” is a jurisdiction, as designated by the commissioner pursuant to s. Ins 52.02 (4r) (b), of this subchapter, that meets one of the following conditions: (a) A non-United States jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority, or, in the case of a covered agreement between the United States and European Union, is a member state of the European Union.
(b) A United States jurisdiction that meets the requirements for accreditation under the financial standards and accreditation program of the national association of insurance commissioners.
(c) A qualified jurisdiction, as determined by the commissioner pursuant to s. Ins 52.02 (4m) (c), and which is not otherwise described in pars. (a) or (b) of this subsection, consistent with the terms and conditions of in-force covered agreements, as specified by the commissioner, and which meets all of the following additional requirements: 1. Provides that an insurer which has its head office or is domiciled in such qualified jurisdiction shall receive credit for reinsurance ceded to a United States-domiciled assuming insurer in the same manner as credit for reinsurance is received for reinsurance assumed by insurers domiciled in such qualified jurisdiction.
2. Does not require a United States-domiciled assuming insurer to establish or maintain a local presence as a condition for entering into a reinsurance agreement with any ceding insurer subject to regulation by the non-United States jurisdiction or as a condition to allow the ceding insurer to recognize credit for such reinsurance.
3. Recognizes the United States state regulatory approach to group supervision and group capital, by providing written confirmation by a competent regulatory authority, in such qualified jurisdiction, that insurers and insurance groups that are domiciled or maintain their headquarters in this state or another jurisdiction accredited by the national association of insurance commissioners shall be subject only to worldwide prudential insurance group supervision including worldwide group governance, solvency and capital, and reporting, as applicable, by the commissioner or the commissioner of the domiciliary state and will not be subject to group supervision at the level of the worldwide parent undertaking of the insurance or reinsurance group by the qualified jurisdiction.
4. Provides written confirmation by a competent regulatory authority in such qualified jurisdiction that information regarding insurers and their parent, subsidiary, or affiliated entities, if applicable, shall be provided to the commissioner in accordance with a memorandum of understanding or similar document between the commissioner and such qualified jurisdiction, including but not limited to the International Association of Insurance Supervisors Multilateral Memorandum of Understanding or other multilateral memoranda of understanding coordinated by the national association of insurance commissioners.
(5) “Solvent scheme of arrangement” means a foreign or alien statutory or regulatory compromise procedure subject to requisite majority creditor approval and judicial sanction in the assuming insurer’s home jurisdiction either to finally commute liabilities of duly noticed classed members or creditors of a solvent debtor, or to reorganize or restructure the debts and obligations of a solvent debtor on a final basis, and which may be subject to judicial recognition and enforcement of the arrangement by a governing authority outside the ceding insurer’s home jurisdiction.
SECTION 6. Ins 52.02 (intro) is amended to read:
Ins 52.02 Except as provided by s. Ins 52.04 and unless otherwise prohibited by the commissioner, with any such prohibition not to be in contravention of an applicable covered agreement, a domestic insurer may take credit for ceded reinsurance as either an asset or a deduction from liability only if the reinsurer at all times complies with one or more of the following: SECTION 7. Ins 52.02 (3) (intro) is amended to read:
Ins 52.02 (3) The reinsurer is domiciled and licensed in, or in the case of a United States branch of an alien assuming insurer is entered through, a state which employs standards regarding credit for reinsurance which the commissioner determines equal or exceed the standards applicable under this chapter subchapter and the reinsurer or United States branch of an alien reinsurer:
SECTION 8. Ins 52.02 (4m) (a) 3. c. (Note) is created to read:
Ins 52.02 (4m) (a) 3.c. (Note) Note: Forms CR-F and CR-S are published as Chapter Ins 52 Appendices D to H. SECTION 9. Ins 52.02 (4m) (a) 3. g. is amended to read:
Ins 52.02 (4m) (a) 3. g. For certified reinsurers not domiciled in the U.S., audited financial statements on a U.S. GAAP basis, regulatory filings, and actuarial opinions opinion, as filed with the non-U.S. jurisdiction supervisor with a translation into English. Audited IFRS basis statements are allowed in lieu of a U.S. GAAP basis statement if they include an audited footnote reconciling equity and net income to a U.S. GAAP basis, or, with the commissioner's approval, audited IFRS basis statements with reconciliation to U.S. GAAP certified by an officer of the company. Upon initial application for certification, the commissioner shall consider audited financial statements for the previous three last two years filed with its non-U.S. jurisdiction supervisor.;
SECTION 10. Ins 52.02 (4m) (a) 5. b. (Note) is created to read:
Ins 52.02 (4m) (a) 5. b. (Note) Note: Forms CR-F and CR-S are published as Chapter Ins 52 Appendices D to H. SECTION 11. Ins 52.02 (4m) (a) 5. d. is amended to read:
Ins 52.02 (4m) 5. d. Annually, the most recent audited financial statements, regulatory filings, and actuarial opinion, as filed with the certified reinsurer's supervisor with a translation into English. Upon the initial certification, audited financial statements for the last three two years filed with the certified reinsurer's supervisor. Audited financial statements should be provided on a U.S. GAAP basis if available. Audited IFRS basis statements are allowed but must include an audited footnote reconciling equity and net income to a U.S. GAAP basis, or, with permission of the commissioner, audited IFRS statements with reconciliation to U.S. GAAP certified by an officer of the company.
SECTION 12. Ins 52.02 (4m) (e) is amended to read:
Ins 52.02 (4m) (e) A certified reinsurer that ceases to assume new business from ceding insurers domiciled in this state may request to maintain its certification in inactive status in order to continue to qualify for a reduction in security for its in-force business. An inactive certified reinsurer shall continue to comply with all applicable requirements of this chapter subchapter, and the commissioner shall assign a rating that takes into account the reasons why the reinsurer is not assuming new business.
SECTION 13. Ins 52.02 (4r) is created to read:
Ins 52.02 (4r) The reinsurance is ceded to an assuming insurer that has been recognized by the commissioner as a reinsurer in a reciprocal jurisdiction, in accordance with pars. (a) to (h).
(a) Credit shall be allowed when the reinsurance is ceded from an insurer domiciled in this state to an assuming insurer meeting each of the conditions set forth below.
1. The assuming insurer shall be licensed to transact reinsurance by, and have its head office or be domiciled in, a reciprocal jurisdiction.
2. The assuming insurer shall have and maintain on an ongoing basis minimum capital and surplus, or its equivalent, calculated on at least an annual basis as of the preceding December 31 or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, and confirmed as set forth in subd. 7, according to the methodology of its domiciliary jurisdiction, in the following amounts:
a. No less than $250,000,000; or
b. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, the minimum capital and surplus equivalents, net of liabilities, or own funds of the equivalent of at least $250,000,000, and, a central fund containing a balance of the equivalent of at least $250,000,000.
3. The assuming insurer shall have and maintain on an ongoing basis, a minimum solvency or capital ratio, as applicable, as set forth in subdpars. a. to c. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it must meet the applicable requirement in the reciprocal jurisdiction where the assuming insurer has its head office or is domiciled, as applicable, and is also licensed:
a. If the assuming insurer has its head office or is domiciled in a reciprocal jurisdiction as defined in s. Ins 52.01 (4) (a), the ratio specified in the applicable covered agreement;
b. If the assuming insurer is domiciled in a reciprocal jurisdiction as defined in s. Ins 52.01 (4) (b), a risk-based capital ratio of 300% of the authorized control level, calculated in accordance with the formula developed by the national association of insurance commissioners; or c. If the assuming insurer is domiciled in a reciprocal jurisdiction as defined in s. Ins 52.01 (4) (c), after consultation with the reciprocal jurisdiction and considering any recommendations published through the national association of insurance commissioners committee process, such solvency or capital ratio as the commissioner determines to be an effective measure of solvency. 4. The assuming insurer shall agree to submit and provide adequate assurance, in the form of a properly executed Form RJ-1, of its agreement to the following:
a. The assuming insurer must agree to provide prompt written notice and explanation to the commissioner if it falls below the minimum requirements set forth in subds. 2. or 3., or if any regulatory action is taken against it for serious noncompliance with applicable law.
b. The assuming insurer must consent in writing to the jurisdiction of the courts of this state and to the appointment of the commissioner as agent for service of process. The commissioner may also require that such consent be provided and included in each reinsurance agreement under the commissioner’s jurisdiction. Nothing in this provision shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent such agreements are unenforceable under applicable insolvency or delinquency laws.
c. The assuming insurer must consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer or its legal successor, that have been declared enforceable in the jurisdiction where the judgment was obtained.
d. Each reinsurance agreement shall include a provision requiring the assuming insurer to provide security in an amount equal to 100% of the assuming insurer’s liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its legal successor on behalf of its estate, if applicable.
e. The assuming insurer must confirm that it is not presently participating in any solvent scheme of arrangement, which involves this state’s ceding insurers, and agrees to notify the ceding insurer and the commissioner and to provide 100% security to the ceding insurer consistent with the terms of the scheme, should the assuming insurer enter into such a solvent scheme of arrangement. Such security shall be in a form consistent with the provisions of s. Ins 52.02 (4m) or s. Ins 52.04. f. The assuming insurer must agree in writing to meet the applicable information filing requirements as set forth in subd. 5.
5. The assuming insurer or its legal successor must provide, if requested by the commissioner, on behalf of itself and any legal predecessors, the following documentation to the commissioner:
a. For the two years preceding entry into the reinsurance agreement and on an annual basis thereafter, the assuming insurer’s annual audited financial statements, in accordance with the applicable law of the jurisdiction of its head office or domiciliary jurisdiction, as applicable, including the external audit report;
b. For the two years preceding entry into the reinsurance agreement, the solvency and financial condition report or actuarial opinion, if filed with the assuming insurer’s supervisor;
c. Prior to entry into the reinsurance agreement and not more than semi-annually thereafter, an updated list of all disputed and overdue reinsurance claims outstanding for 90 days or more, regarding reinsurance assumed from ceding insurers domiciled in the United States; and
d. Prior to entry into the reinsurance agreement and not more than semi-annually thereafter, information regarding the assuming insurer’s assumed reinsurance by ceding insurer, ceded reinsurance by the assuming insurer, and reinsurance recoverable on paid and unpaid losses by the assuming insurer to allow for the evaluation of the criteria set forth in subd. 6.
6. The assuming insurer must maintain a practice of prompt payment of claims under reinsurance agreements. The lack of prompt payment will be evidenced if any of the following criteria is met:
a. More than 15% of the reinsurance recoverables from the assuming insurer are overdue and in dispute as reported to the commissioner;
b. More than 15% of the assuming insurer’s ceding insurers or reinsurers have overdue reinsurance recoverable on paid losses of 90 days or more which are not in dispute and which exceed for each ceding insurer $100,000, or as otherwise specified in a covered agreement; or
c. The aggregate amount of reinsurance recoverable on paid losses which are not in dispute, but are overdue by 90 days or more, exceeds $50,000,000, or as otherwise specified in a covered agreement.
7. The assuming insurer’s supervisory authority must confirm to the commissioner on an annual basis, as of the preceding December 31 or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, that the assuming insurer complies with the requirements set forth in subd. 2. and 3.
8. Nothing in this provision precludes an assuming insurer from providing the commissioner with information on a voluntary basis.
(b) The commissioner shall timely create and publish electronically a list of reciprocal jurisdictions.
1. A list of reciprocal jurisdictions is published through the national association of insurance commissioners committee process. The commissioner’s list shall include any reciprocal jurisdiction as defined at s. Ins 52.01 (4) (a) and (b) and shall consider any other reciprocal jurisdiction included on the national association of insurance commissioners list. The commissioner may approve a jurisdiction that does not appear on the national association of insurance commissioners list of reciprocal jurisdictions as provided by applicable law, regulation or in accordance with criteria published through the national association of insurance commissioners committee process. 2. The commissioner may remove a jurisdiction from the list of reciprocal jurisdictions upon a determination that the jurisdiction no longer meets one or more of the requirements of a reciprocal jurisdiction, as provided by applicable law, regulation, or in accordance with a process published through the national association of insurance commissioners committee process, except that the commissioner shall not remove from the list a reciprocal jurisdiction as defined under s. Ins 52.01 (4) (a) or (b). Upon removal of a reciprocal jurisdiction from this list, credit for reinsurance ceded to an assuming insurer which has its home office or is domiciled in that jurisdiction shall be allowed, if otherwise allowed pursuant to this subchapter. (c) The commissioner shall timely create and publish electronically a list of assuming insurers that have satisfied the conditions set forth in this subsection and to which cessions shall be granted credit in accordance with this subsection.
1. If a national association of insurance commissioners accredited jurisdiction has determined that the conditions set forth in par. (a) have been met, the commissioner has the discretion to defer to that jurisdiction’s determination and add such assuming insurer to the list of assuming insurers to which cessions shall be granted credit in accordance with this subsection. The commissioner may accept financial documentation filed with another national association of insurance commissioners accredited jurisdiction or with the national association of insurance commissioners in satisfaction of the requirements of par. (a).
2. When requesting that the commissioner defer to another national association of insurance commissioners accredited jurisdiction’s determination, an assuming insurer must submit a properly executed Form RJ-1 and additional information as the commissioner may require. Notwithstanding the foregoing, the commissioner will not impose any requirement that conflicts with an applicable covered agreement. A state that has received such a request will notify other states through the national association of insurance commissioners committee process and provide relevant information with respect to the determination of eligibility.
(d) If the commissioner determines that an assuming insurer no longer meets one or more of the requirements under this subsection, the commissioner may revoke or suspend the eligibility of the assuming insurer for recognition under this subsection.
1. While an assuming insurer’s eligibility is suspended, no reinsurance agreement issued, amended, or renewed after the effective date of the suspension qualifies for credit except to the extent that the assuming insurer’s obligations under the contract are secured in accordance with s. Ins 52.04. 2. If an assuming insurer’s eligibility is revoked, no credit for reinsurance may be granted after the effective date of the revocation with respect to any reinsurance agreements entered into by the assuming insurer, including reinsurance agreements entered into prior to the date of revocation, except to the extent that the assuming insurer’s obligations under the contract are secured in a form acceptable to the commissioner and consistent with the provisions of s. Ins 52.04. (e) Before denying statement credit or imposing a requirement to post security with respect to par. (d) or adopting any similar requirement that will have substantially the same regulatory impact as security, the commissioner shall:
1. Communicate with the ceding insurer, the assuming insurer, and the assuming insurer’s supervisory authority that the assuming insurer no longer satisfies one of the conditions listed in par. (a)
2. Provide the assuming insurer with 30 days from the initial communication to submit a plan to remedy the defect, and 90 days from the initial communication to remedy the defect, except in exceptional circumstances in which the commissioner determines that a shorter period is necessary for policyholder and other consumer protection;
3. After the expiration of 90 days or less, as set out in subd. 2, if the commissioner determines that no or insufficient action was taken by the assuming insurer, the commissioner may impose any of the requirements as set out in this subsection; and
4. Provide a written explanation to the assuming insurer of any of the requirements set out in this subsection.
(f) If subject to a legal process of rehabilitation, liquidation, or conservation, as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring that the assuming insurer post security for all outstanding liabilities.
(g) Nothing in this subsection shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in that reinsurance agreement, except as expressly prohibited by this subchapter or other applicable law or regulation.
(h) Credit may be taken under this subsection only for reinsurance agreements entered into, amended, or renewed on or after the effective date of this subsection . . . . [LRB inserts date], and only with respect to losses incurred and reserves reported on or after the later of (i) the date on which the assuming insurer has met all eligibility requirements pursuant to this subsection, and (ii) the effective date of the new reinsurance agreement, amendment, or renewal.
1. This paragraph does not alter or impair a ceding insurer’s right to take credit for reinsurance, to the extent that credit is not available under this subsection, as long as the reinsurance qualifies for credit under any other applicable provision of this subchapter.
2. Nothing in this subsection shall authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement except as permitted by the terms of the agreement.
3. Nothing in this subsection shall limit, or in any way alter, the capacity of parties to any reinsurance agreement to renegotiate the agreement.
SECTION 14. Ins 52.05 (2) (k) (intro.) is amended to read:
Ins 52.05 (2) (k) (intro.) Notwithstanding other provisions of this chapter subchapter, when a trust agreement is established in conjunction with a reinsurance agreement covering risks other than life, annuities and accident and health, and where it is customary practice to provide a trust agreement for a specific purpose, the trust agreement may, notwithstanding any other conditions in this chapter subchapter, provide that the ceding insurer agrees to use and apply amounts drawn upon the trust account, without diminution because of the insolvency of the ceding insurer or the assuming insurer, for the following purposes:
SECTION 15. Ins 52.07 (1) (intro.), and (2) to (5) are followed by a newly created subchapter and are amended to read
52.07 (1) This chapter subchapter applies to determine whether credit may be taken for:
(2) Section Ins 6.73 continues to apply for the purpose of determining whether credit may be taken for reinsurance which is not subject to this chapter subchapter under sub. (1). Note: Ins 6.73 was repealed eff. 8-1-93.
(3) This chapter subchapter and ch. Ins 55 are in addition to and do not limit the commissioner's authority under s. 618.21 (1) (a), 618.23 (1) (a), 618.26 (1) (a), 623.11, 623.12 or 623.21, or ch. 645, Stats., or s. Ins 51.80. Even if credit for reinsurance is permitted under this chapter and ch. Ins 55, the commissioner may under those provisions require a licensed insurer to exclude the effects of the credit for the purpose of determining compliance with security or compulsory surplus. (4) Nothing in this chapter subchapter or ch. Ins 55 relieves an insurer or an officer or director of an insurer or an accountant or actuary from responsibility under s. 627.23 (3), Stats., or fiduciary or professional responsibility, to assess the financial condition of a reinsurer. Accreditation by the commissioner does not create a presumption that a reinsurer is in compliance with this chapter subchapter or that it is in sound financial condition and no reinsurer or officer, employe employee or agent of a reinsurer may make such a representation. (5) This chapter Except to the extent necessary to prevent a conflict with an applicable covered agreement, this subchapter does not limit or change the requirements for town mutual insurers under ss. 612.31 and 612.33, Stats. This chapter subchapter applies to the state life fund. SECTION 16. Ins 52 Subchapter II is created to read:
SUBCHAPTER II
Credit for reinsurance INVOLVING term and universal life reserve financing
Ins 52.20 Purpose, intent, and applicability. In addition to provisions contained at s. Ins 2.80, the following apply to this subchapter.
