Ins 3.09(1)(1)
Purpose. This section implements and interprets s.
Ins 6.75 (2) (i) and
(j) and ss.
601.01,
601.42,
611.19 (1),
611.24,
618.21,
620.02,
623.02,
623.03,
623.04,
623.11,
627.05 and
628.34 (12), Stats., for the purpose of establishing minimum requirements for the transaction of mortgage guaranty insurance.
Ins 3.09(2)
(2)
Scope. This rule shall apply to the underwriting, investment, marketing, rating, accounting and reserving activities of insurers which write the type of insurance authorized by s.
Ins 6.75 (2) (i) and
(j).
Ins 3.09(3)(a)(a) “Amount at risk" means the coverage percentage or the claim settlement option percentage multiplied by the face of amount of a mortgage or by the insured amount of a lease.
Ins 3.09(3)(b)
(b) “Annual statement" means the fire and casualty annual statement form specified in s.
Ins 7.02, Forms 22-010 and 22-011.
Ins 3.09(3)(c)
(c) “Contingency reserve" means the reserve established for the protection of policyholders against the effect of losses resulting from adverse economic cycles.
Ins 3.09(3)(d)
(d) “Equity" means the complement of the Loan-to-Value.
Ins 3.09(3)(e)
(e) “Face amount" means the entire indebtedness under an insured mortgage before computing any reduction because of an insurer's option limiting its coverage.
Ins 3.09(3)(f)
(f) “Loan-to-value" means the ratio of the entire indebtedness to value of the collateral property expressed as a percentage.
Ins 3.09(3)(g)
(g) “Mortgage guaranty account" means the portion of the Contingency Reserve which complies with
26 USC 832 (e) as amended.
Ins 3.09(3)(i)
(i) “Mortgage guaranty insurer" means an insurer which:
Ins 3.09(3)(i)2.
2. Insures pursuant to s.
Ins 6.75 (2) (j) against loss arising from failure of debtors to meet financial obligations to creditors under evidences of indebtedness secured by a junior lien or charge on real estate.
Ins 3.09(3)(j)
(j) “Mortgage guaranty insurers report of policyholders position" means the annual supplementary report required by s.
Ins 7.02, Forms 22-090 and 22-091.
Ins 3.09(3)(k)
(k) “NAIC Ratio—Investment Yield" means net investment income earned after taxes from the annual statement divided by mean invested assets.
Ins 3.09(3)(L)
(L) “Person" means any individual, corporation, association, partnership or any other legal entity.
Ins 3.09(3)(m)
(m) “Policyholders position" includes the contingency reserve established under sub.
(14), the deferred risk charge established under sub.
(13) (b) and surplus as regards policyholders. “Minimum policyholders position" is calculated as described in sub.
(5).
Ins 3.09(3)(n)
(n) “Surplus as regards policyholders" means an insurer's net worth, the difference between its assets and liabilities, as reported in its annual statement.
Ins 3.09(4)
(4)
Discrimination. No mortgage guaranty insurer may discriminate in the issuance or extension of mortgage guaranty insurance on the basis of the geographic location of the property or the applicant's sex, marital status, race, color, creed or national origin.
Ins 3.09(5)(a)
(a) For the purpose of complying with s.
623.11, Stats., a mortgage guaranty insurer shall maintain at all times a minimum policyholders position in the amount required by this section. The policyholders position shall be net of reinsurance ceded but shall include reinsurance assumed.
Ins 3.09(5)(b)
(b) If a mortgage guaranty insurer does not have the minimum amount of policyholders position required by this section it shall cease transacting new business until such time that its policyholders position is in compliance with this section.
Ins 3.09(5)(c)
(c) If a policy of mortgage guaranty insurance insures individual loans with a percentage claim settlement option on such loans, a mortgage guaranty insurer shall maintain a policyholders position based on: each $100 of the face amount of the mortgage; the percentage coverage; and the loan-to-value category. The minimum amount of policyholders position shall be calculated in the following manner:
Ins 3.09(5)(c)1.
1. If the loan-to-value is greater than 75%, the minimum policyholders position per $100 of the face amount of the mortgage for the specific percent coverage shall be as shown in the schedule below:
- See PDF for table 
Ins 3.09(5)(c)2.
2. If the loan-to-value is at least 50% and not more than 75%, the minimum amount of the policyholders position shall be 50% of the minimum of the amount calculated under subd.
1. Ins 3.09(5)(c)3.
3. If the loan-to-value is less than 50%, the minimum amount of policyholders position shall be 25% of the amount calculated under subd.
1. Ins 3.09(5)(d)
(d) If a policy of mortgage guaranty insurance provides coverage on a group of loans subject to an aggregate loss limit, the policyholders position shall be:
Ins 3.09(5)(d)1.
1. If the equity is not more than 50% and is at least 20%, or equity plus prior insurance or a deductible is at least 25% and not more than 55%, the minimum amount of policyholders position shall be calculated as follows:
-
See PDF for table Ins 3.09(5)(d)2.
2. If the equity is less than 20%, or the equity plus prior insurance or a deductible is less than 25%, the minimum amount of policyholders position shall be 200% of the amount required by subd.
1. Ins 3.09(5)(d)3.
3. If the equity is more than 50%, or the equity plus prior insurance or a deductible is more than 55%, the minimum amount of policyholders position shall be 50% of the amount required by subd.
1. Ins 3.09(5)(e)
(e) If a policy of mortgage guaranty insurance provides for layers of coverage, deductibles or excess reinsurance, the minimum amount of policyholders position shall be computed by subtraction of the minimum position for the lower percentage coverage limit from the minimum position for the upper or greater coverage limit.
Ins 3.09(5)(f)
(f) If a policy of mortgage guaranty insurance provides for coverage on loans secured by junior liens, the policyholders position shall be:
Ins 3.09(5)(f)1.
1. If the policy provides coverage on individual loans, the minimum amount of policyholders position shall be calculated as in par.
(c) as follows:
Ins 3.09(5)(f)1.a.
a. The loan-to-value percent is the entire loan indebtedness on the property divided by the value of the property;
Ins 3.09(5)(f)1.b.
b. The percent coverage is the insured portion of the junior loan divided by the entire loan indebtedness on the collateral property; and
Ins 3.09(5)(f)1.c.
c. The face amount of the insured mortgage is the entire loan indebtedness on the property.
Ins 3.09(5)(f)2.
2. If the policy provides coverage on a group of loans subject to an aggregate loss limit, the policyholders position shall be calculated according to par.
(d) as follows:
Ins 3.09(5)(f)2.a.
a. The equity is the complement of the loan-to-value percent calculated as in subd.
1.;
Ins 3.09(5)(f)2.c.
c. The face amount of the insured mortgage is the entire loan indebtedness on the property.
Ins 3.09(5)(g)
(g) If a policy of mortgage guaranty insurance provides for coverage on leases, the policyholders position shall be $4 for each $100 of the insured amount of the lease.
Ins 3.09(5)(h)
(h) If a policy of mortgage guaranty insurance insures loans with a percentage loss settlement option coverage between any of the entries in the schedules in this subsection, then the factor for policyholders position per $100 of the face amount of the mortgage shall be prorated between the factors for the nearest Percent Coverage listed.
Ins 3.09(6)
(6)
Limitation on investment. A mortgage guaranty insurer shall not invest in notes or other evidences of indebtedness secured by mortgage or other lien upon real property. This section shall not apply to obligations secured by real property, or contracts for the sale of real property, which obligations or contracts of sale are acquired in the course of the good faith settlement of claims under policies of insurance issued by the mortgage guaranty insurer, or in the good faith disposition of real property so acquired.
Ins 3.09(7)(a)
(a) A mortgage guaranty insurer shall not insure loans secured by properties in a single or contiguous housing or commercial tract in excess of 10% of the insurer's admitted assets. A mortgage guaranty insurer shall not insure a loan secured by a single risk in excess of 10% of the insurer's admitted assets. In determining the amount of such risk or risks, the insurer's liability shall be computed on the basis of its election to limit coverage and net of reinsurance ceded to an insurer authorized to transact such reinsurance in this state. “Contiguous" for the purpose of this subsection means not separated by more than one-half mile.
Ins 3.09(7)(b)
(b) A mortgage guaranty insurer shall not insure loans with balloon payment provisions unless the policy provides:
Ins 3.09(7)(b)1.
1. That liability for the balloon payment is specifically excluded; or
Ins 3.09(7)(b)2.
2. That at the time the lender calls the loan, the lender will offer new or extended financing at the then market rates; or
Ins 3.09(7m)
(7m)
Segregated trust requirements. A segregated trust established under this section shall be established by a reinsurer for the benefit of a mortgage guaranty insurer and shall satisfy all of the following requirements:
Ins 3.09(7m)(a)
(a) Has a trustee domiciled in the mortgage guaranty insurer's state of domicile, domiciled in Wisconsin or approved by the commissioner.
Ins 3.09(7m)(d)
(d) Makes quarterly and annual reports as required by the commissioner.
Ins 3.09(7m)(e)
(e) Is subject to withdrawals only by and under the control of the ceding mortgage guaranty insurer.
Ins 3.09(7m)(h)
(h) Provides to the commissioner an opinion of counsel stating that the segregated trust and its governing agreements comply with the applicable sections of this section and that the reinsured will have a valid and perfected security interest or an equitable interest in the assets transferred under the trust agreements, or both, and will be entitled to use those assets for the purpose of satisfying a reinsurer's obligations under the trust agreement in the event of the bankruptcy of the reinsurer.
Ins 3.09(7m)(i)
(i) Is governed by an agreement which, together with all amendments, has been approved by the commissioner.
Ins 3.09(8)(a)(a) A mortgage guaranty insurer may, by contract, reinsure any insurance it transacts, except that no mortgage guaranty insurer may enter into reinsurance arrangements designed to circumvent the compensation control provisions of sub.
(16) or the contingency reserve requirement of sub.
(14). The unearned premium reserve required by sub.
(13), the contingency reserve required by sub.
(14) and the loss reserve required by sub.
(15) shall be established and maintained by the original insurer or by the assuming reinsurer so that the aggregate reserves shall be equal to or greater than the reserves required by subs.
(13),
(14) and
(15).
Ins 3.09(8)(b)
(b) If reinsurance is assumed by an insurer which insures or reinsures other lines of insurance in addition to mortgage guaranty insurance, then in order for a mortgage guaranty insurer to receive credit for reinsurance ceded in its financial statements and in the calculation of minimum policyholders position, all of the following shall occur:
Ins 3.09(8)(b)1.
1. The reinsurance agreement and the segregated account or segregated trust arrangements shall be submitted to the commissioner for approval.
Ins 3.09(8)(b)2.
2. The reinsurer shall establish and maintain in a segregated account or segregated trust the reserves required by subs.
(13),
(14) and
(15).
Ins 3.09(8)(b)3.
3. If the reinsurer establishes a segregated trust, the reinsurance agreement shall provide that:
Ins 3.09(8)(b)3.a.
a. The segregated trust shall be in a form approved by the commissioner;
Ins 3.09(8)(b)3.b.
b. The commissioner shall approve any amendments to the reinsurance agreement before the amendments become effective;
Ins 3.09(8)(b)3.c.
c. The ceding mortgage guaranty insurer has a right to terminate the ceding of additional insurance under the reinsurance agreement if so ordered by the commissioner;
Ins 3.09(8)(b)3.d.
d. The commissioner has the right to request from the assuming reinsurer information concerning its financial condition; and
Ins 3.09(8)(b)3.e.
e. The assuming reinsurer shall notify the commissioner of any material change in its financial condition.
Ins 3.09(8)(c)
(c) In reviewing a reinsurance arrangement with an insurer which writes other lines of insurance in addition to mortgage guaranty, the commissioner may consider any or all of the following:
Ins 3.09(8)(c)2.
2. The reinsurance agreement and its compliance with this section.
Ins 3.09(8)(c)3.
3. The trust agreement and its compliance with this section. After review of the reinsurance and trust agreements, the commissioner may deny credit for the reinsurance on the ceding mortgage guaranty insurer's financial statements, if deemed necessary for the protection of the mortgage guaranty insurer or its Wisconsin insureds.
Ins 3.09(9)
(9)
Advertising. No mortgage guaranty insurer or any agent or representative of a mortgage guaranty insurer shall prepare or distribute or assist in preparing or distributing any brochure, pamphlet, report or any form of advertising to the effect that the real estate investments of any financial institution are “insured investments," unless the brochure, pamphlet, report or advertising clearly states that the loans are insured by insurers possessing a certificate of authority to transact mortgage guaranty insurance in this state or are insured by an agency of the federal government, as the case may be.
Ins 3.09(10)
(10)
Policy forms. All policy forms and endorsements shall be filed with and be subject to approval of the commissioner. With respect to owner-occupied, single-family dwellings, the mortgage guaranty insurance policy shall provide that the borrower shall not be liable to the insurance company for any deficiency arising from a foreclosure sale.
Ins 3.09(11)(a)(a) The total consideration charged for mortgage guaranty insurance policies, including policy and other fees or similar charges, shall be considered premium and must be stated in the policy and shall be subject to the reserve requirements of subs.
(13) and
(14).
Ins 3.09(11)(b)
(b) The rate making formula for mortgage guaranty insurance shall contain a factor or loading sufficient to produce the amount required for the contingency reserve prescribed by sub.
(14).
Ins 3.09(12)(a)(a) The financial condition and operations of a mortgage guaranty insurer shall be reported annually on the annual statement.
Ins 3.09(12)(b)
(b) The unearned premium reserve required by sub.
(13) shall be reported in the underwriting and investment exhibit—recapitulation of all premiums schedule of the annual statement.
Ins 3.09(12)(c)
(c) The contingency reserve required by sub.
(14) shall be reported as a liability in the annual statement. This liability may be reported as unpaid losses, mortgage guaranty account or other appropriately labeled write-in item. Appropriate entries shall be made in the underwriting and investment exhibit—statement of income of the annual statement. The change in contingency reserve for the year shall be reported in the annual statement as a reduction of or a deduction from underwriting income. If the contingency reserve is recorded as a loss liability, the change in the reserve shall be excluded from loss development similar to fidelity and surety losses incurred but not reported. The development of the contingency reserve and policyholders position shall be shown in an appropriate supplemental schedule to the annual statement as prescribed by the commissioner.
Ins 3.09(12)(d)
(d) The loss reserves required by sub.
(15) shall be reported in the underwriting and investment exhibit—unpaid losses and loss adjustment schedule of the annual statement.
Ins 3.09(12)(e)
(e) Any property acquired pursuant to the exercise of the claim settlement option shall be valued net of encumbrances; and an aggregate amount of such property may be held as is permitted for nonlife insurer investments pursuant to s.
620.22 (5), Stats.
Ins 3.09(12)(g)
(g) An insurer which writes mortgage guaranty insurance and any other class of insurance business shall establish a segregated account for mortgage guaranty insurance. An insurer which writes more than one class of mortgage guaranty insurance shall establish a segregated account for each class of mortgage guaranty insurance. An insurer which reinsures mortgage guaranty insurance and which writes or reinsures any other class of insurance business shall establish a segregated account or segregated trust for mortgage guaranty reinsurance. The classes of mortgage guaranty insurance are those types of insurance defined in:
