Ins 51.75 History
History: Cr.
Register, December, 1996, No. 492, eff. 1-1-97.
Ins 51.80
Ins 51.80
Capital, compulsory and security surplus. Ins 51.80(1)(1)
Purpose. This section implements and interprets ss.
600.03 (45),
618.21 (1) (a),
623.11 and
623.12, Stats., for the purpose of establishing the amount of capital and compulsory surplus an insurer is required to maintain to provide reasonable security against contingencies affecting its financial position that are not fully covered by reserves or by reinsurance, and the amount of security surplus that an insurer should maintain in order to provide an ample margin of safety and clearly assure a sound operation.
Ins 51.80(2)
(2) Scope. This section applies to all lines of insurance except title insurance and mortgage guarantee insurance as defined in s.
Ins 6.75 (2) (h) and
(i), and to each insurer subject to ss.
623.11 and
645.41, Stats., except insurers licensed under chs.
612 or
616, Stats., insurers subject to s.
Ins 9.04 and life insurers domiciled in foreign countries.
Ins 51.80(3)
(3) Compulsory surplus. Except for the adjustments to the circumstances of individual insurers provided in s.
623.11 (1) (b), Stats., and sub.
(6), the amount of compulsory surplus of an insurer shall be the greater of:
Ins 51.80(3)(a)1.
1. 15% of premiums for individual life and disability insurance, not including variable life insurance;
Ins 51.80(3)(a)2.
2. 10% of premiums for group life and disability insurance, not including variable life insurance;
Ins 51.80(3)(a)3.
3. The greater of 2% of reserves or 7 1⁄2% of premiums for annuities and deposit administration funds, not including variable annuity business;
Ins 51.80(3)(b)
(b) $2 million for an insurer first authorized to do business in Wisconsin on or after January 1, 1982, or the amount required by statute or administrative order before that date for other insurers.
Ins 51.80(4)
(4) Security surplus. The security surplus of an insurer shall be the compulsory surplus plus:
Ins 51.80(4)(b)
(b) 40% of compulsory surplus for other insurers with premiums of $10 million or less reduced by 1% of compulsory surplus for each $33 million of additional premiums in excess of $10 million, but not less than 10% of compulsory surplus.
Ins 51.80(5)
(5) Separate determination. Compulsory surplus and security surplus are computed separately and are not added together for purposes of determining compliance with this rule.
Ins 51.80(6)
(6) Premiums. For purposes of subs.
(3) and
(4), for all insurers except insurers that file on the national association of insurance commissioners health annual statement blank, premiums are gross premiums and other considerations received for insurance and annuities in the 12-month period ending on or not more than 60 days before the date as of which the calculation is made with the following deductions and exclusions:
Ins 51.80(6)(a)
(a) Exclude annual and initial reinsurance premiums for contracts of modified coinsurance and premium deposits.
Ins 51.80(6)(b)
(b) Deduct return premiums; premiums ceded to authorized reinsurers other than premiums of contracts of modified coinsurance; and retrospective premium refunds and dividends paid or credited to policyholders.
Ins 51.80(6m)
(6m)
Heath insurance premiums. For purposes of subs.
(3) and
(4), for insurers that file on the national association of insurance commissioners health annual statement blank, premiums are earned premiums and other considerations for insurance in the 12-month period ending on or not more than 60 days before the date as of which the calculation is made with the deductions and exclusions allowed in sub.
(6) (a) and
(b).
Ins 51.80(7)
(7) Individual circumstances. In the event of special circumstances of an individual insurer, the commissioner may by order:
Ins 51.80(7)(a)
(a) Adjust the factors in this section to calculate the compulsory or security surplus as a higher or lower amount than the amount determined under sub.
(3) or
(4);
Ins 51.80(7)(b)
(b) Establish additional factors in relation to any relevant variables in determining the amount of compulsory surplus required for such insurer; and
Ins 51.80(7)(c)
(c) Require minimum capital in an amount of less than $2 million.
Ins 51.80(8)
(8) Combining insurers. The commissioner may require the combination of 2 or more insurers for application of this section or may permit such combination upon request by such insurers.
Ins 51.80(9)
(9) Reporting. Every insurer to which this section applies shall compute its compulsory surplus and security surplus, as of the preceding December 31, and include a copy of such computation as a part of its annual statement filed with the commissioner under s.
601.42, Stats., and s.
Ins 7.02.
Ins 51.80(10)
(10) Existing orders. This section shall not affect orders of the commissioner requiring a different level of surplus existing on August 1, 1982.
Ins 51.80(11)
(11) Date of first report. The first report required by sub.
(9) shall be computed as of December 31, 1982 and filed with the insurer's annual statement due March 1, 1983.
Ins 51.80 Note
Note: Compulsory surplus is the amount of surplus that an insurer is required to have in order not to be financially hazardous under s.
645.41 (4), Stats. An insurer must comply with investment restrictions and permitted classes of investments in meeting required reserves and compulsory and security surplus. Security surplus is not required beyond its use as a standard in investment regulation.
Ins 51.80 Note
The rule is not intended to determine the optimum level of surplus an insurer should have. That level should be decided by the officials of each insurer to reflect the individual circumstances and goals of the insurer. The rule is intended instead to establish a basic minimum level with which most insurers can easily comply.
Ins 51.80 Note
The commissioner may see fit to require a higher level of surplus, or permit a lower level, based on special circumstances.
Ins 51.80 Note
For example, a specific order might establish a higher surplus requirement for a small insurer writing primarily surety business or a lower requirement for certain kinds of annuity business or for contracts providing benefits payable in variable dollar amounts within the meaning of s.
611.25, Stats., and s.
Ins 2.13. Other contingencies, factors and variables which may be considered are set forth in s.
623.11, Stats.
Ins 51.80 Note
Since the rule does not apply to some lines of insurance and certain types of insurers, other requirements may be necessary for those companies. This might entail separate rules or specific orders. However, the proposed rule will apply to a high percentage of the insurance business written in Wisconsin.
Ins 51.80 Note
The treatment of reinsurance premiums in the rule may not be clear. In the case of all reinsurance other than modified coinsurance, it is intended that premiums on direct business be initially included by the originating company under sub. (6) (intro.) and that reinsurance premiums ceded to a reinsurer be deducted under sub. (6) (b). The reinsurance premiums ceded would be included as premiums of the reinsurer under sub. (6) (intro.). In the case of modified coinsurance, the direct premiums are included by the originating company under sub. (6) (intro.) and the reinsurance premiums are excluded for purposes of the rule by both the originating company and the reinsurer.
Ins 51.80 Note
Note: Copies of forms OCI 22-008 and OCI 22-009, for use under sub. (9), may be obtained from the Office of the Commissioner of Insurance, P.O. Box 7873, Madison, WI 53707-7873.
Ins 51.80 History
History: Cr.
Register, July, 1982, No. 319, eff. 8-1-82; am (1) and (7),
Register, January, 1989, No. 397, eff. 2-1-89; reprinted to correct error in (3) (a) 3.,
Register, March, 1989, No. 399; am. (9),
Register, January, 1992, No. 433, eff. 2-1-92
; renum. from Ins 14.02,
Register, December, 1996, No. 492, eff. 1-1-97; am. (2),
Register, February, 2000, No. 530, eff. 3-1-00; correction in (2) made under s.
13.92 (4) (b) 7., Stats.,
Register June 2014 No. 702;
CR 22-071: am. (3) (a) 1. to 3., cr. (3) (a) 3e. to 3s., am. (6) (intro.), cr. (6m) Register June 2023 No. 810, eff. 7-1-23.
