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:
Ins 3.09(12)(h)
(h) Each segregated account or segregated trust established to comply with par.
(g) shall contain all of the following applicable reserves:
Ins 3.09(13)
(13)
Unearned premium reserve. Subject to sub.
(8), a mortgage guaranty insurer shall compute and maintain an unearned premium reserve on policies in force as follows:
Ins 3.09(13)(a)
(a) For premium plans on which the premium is paid annually, the unearned premium reserve shall be calculated on either an annual or monthly pro rata basis except that the portion of the first-year premium, excluding policy and other fees or similar charges, which exceeds twice the subsequent renewal premium rate, shall be considered a deferred risk premium. The deferred risk premium shall be contributed to and maintained in the unearned premium reserve until released as earned. The deferred risk premium shall be earned in accordance with the factors for a 10-year premium period in par.
(b) or any other formula approved by the commissioner.
Ins 3.09(13)(b)
(b) For premium plans on which the premium is paid in advance for periods of time greater than one year but less than 16 years, the unearned premium reserve shall be calculated by multiplying the premiums collected by the appropriate unearned premium factor from the table set forth below:
Ins 3.09 Note
Note:
For purposes of this calculation, premiums collected means either 90% of the premiums collected or the premium collected less a dollar amount or percentage amount approved by the commissioner to represent initial expenses of selling and issuing a new policy.
Ins 3.09(13)(c)
(c) For premium plans on which the premium is paid in advance for periods of 16 years or more, the unearned premium reserve shall be calculated either by a method approved by the commissioner or by dividing the premium collected, as defined above in par.
(b), into 2 parts. The first part shall be the amount which is equal to the premium collected for a 15-year premium and which shall be earned in the same manner as a 15-year premium. The second part is the remaining amount of premium in excess of the 15-year premium, which shall be earned pro rata over the remaining term of the premium.
Ins 3.09(14)(a)(a) Subject to sub.
(8), a mortgage guaranty insurer shall make an annual contribution to the contingency reserve which in the aggregate shall be the greater of:
Ins 3.09(14)(a)1.
1. 50% of the net earned premium reported in the annual statement; or
Ins 3.09(14)(a)2.a.
a. The policyholders position established under sub.
(5) on residential buildings designed for occupancy by not more than four families divided by 7;
Ins 3.09(14)(a)2.b.
b. The policyholders position established under sub.
(5) on residential buildings designed for occupancy by 5 or more families divided by 5;
Ins 3.09(14)(a)2.c.
c. The policyholders position established under sub.
(5) on buildings occupied for industrial or commercial purposes divided by 3; and
Ins 3.09(14)(b)
(b) If the mortgage guaranty coverage is not expressly provided for in this section, the commissioner may establish a rate formula factor that will produce a contingency reserve adequate for the risk assumed.
Ins 3.09(14)(c)
(c) The contingency reserve established by this subsection shall be maintained for 120 months. That portion of the contingency reserve established and maintained for more than 120 months shall be released and shall no longer constitute part of the contingency reserve.
Ins 3.09(14)(d)1.1. With the approval of the commissioner, withdrawals may be made from the contingency reserve when incurred losses and incurred loss expenses exceed the greater of either 35% of the net earned premium or 70% of the amount which par.
(a) requires to be contributed to the contingency reserve in such year.
Ins 3.09(14)(d)2.
2. On a quarterly basis, provisional withdrawals may be made from the contingency reserve in an amount not to exceed 75% of the withdrawal calculated in accordance with subd.
1. Ins 3.09(14)(e)
(e) With the approval of the commissioner, a mortgage guaranty insurer may withdraw from the contingency reserve any amounts which are in excess of the minimum policyholders position. In reviewing a request for withdrawal pursuant to this paragraph, the commissioner may consider loss development and trends. If any portion of the contingency reserve for which withdrawal is requested pursuant to this paragraph is maintained by a reinsurer, the commissioner may also consider the financial condition of the reinsurer. If any portion of the contingency reserve for which withdrawal is requested pursuant to this paragraph is maintained in a segregated account or segregated trust and such withdrawal would result in funds being removed from the segregated account or segregated trust, the commissioner may also consider the financial condition of the reinsurer.
Ins 3.09(14)(f)
(f) Releases and withdrawals from the contingency reserve shall be accounted for on a first-in-first-out basis as provided in sub.
(12) (g).
Ins 3.09(14)(g)
(g) The calculations to develop the contingency reserve shall be made in the following sequence:
Ins 3.09(15)(a)(a) Subject to sub.
(8), a mortgage guaranty insurer shall compute and maintain adequate loss reserves. The methodology used for computing the loss reserves shall accurately reflect loss frequency and loss severity and shall include components for claims reported and unpaid and for claims incurred but not reported.
