Ins 3.65 Standardized claim format. Ins 3.651 Standardized explanation of benefits and remittance advice format. Ins 3.67 Benefit appeals under certain policies. Ins 3.75 Continuation of discontinued employer provided health group policy coverage for employees and their dependents. Ins 3.01Ins 3.01 Accumulation benefit riders attached to health and accident policies. Except where such rider is used only on a policy replacing the company’s own policy, and so recites, no rider providing for accumulations of benefits will be approved for use upon any policy of health and accident insurance, whether it is proposed to issue such rider with or without an additional premium. Such rider operates as an aid to twisting the policies of another company in such manner as to make its use a direct encouragement of this practice. Ins 3.02Ins 3.02 Automobile fleets, vehicles not included in. Individually owned motor vehicles cannot be included or covered by fleet rates. The determining factor for inclusion under fleet coverage must be ownership and not management or use. Ins 3.04Ins 3.04 Dividends not deducted from premiums in computing loss reserves. Premiums returned to policyholders as dividends may not be deducted from the earned premiums in computing loss reserves under s. 623.04, Stats. Ins 3.04 HistoryHistory: 1-2-56; emerg. am. eff. 6-22-76; am. Register, September, 1976, No. 249, eff. 10-1-76. Ins 3.08Ins 3.08 Municipal bond insurance. Ins 3.08(1)(1) Purpose. This section implements and interprets ss. 601.42, 611.19 (1), 618.21, 623.03, 623.04, 627.05, 628.34 (2), 632.14, and 632.17, Stats., for the purpose of establishing minimum requirements for the transaction of a type of surety insurance known as municipal bond insurance. Ins 3.08(2)(2) Scope. This section shall apply to the underwriting, marketing, rating, accounting and reserving activities of insurers which write municipal bond insurance. Ins 3.08(3)(a)(a) “Annual statement” means the fire and casualty annual statement form specified in s. Ins 7.02, Forms 22-010 and 22-011. Ins 3.08(3)(b)(b) “Contingency reserve” means a reserve established for the protection of policyholders covered by policies insuring municipal bonds against the effect of excessive losses occurring during adverse economic cycles. Ins 3.08(3)(c)(c) “Cumulative net liability” means one-third of one percent of the insured unpaid principal and insured unpaid interest covered by in-force policies of municipal bond insurance. Ins 3.08(3)(d)(d) “Municipal bonds” means securities which are issued by or on behalf of or are paid or guaranteed by: Ins 3.08(3)(d)1.1. Any state, territory or possession of the United States of America; Ins 3.08(3)(d)2.2. Any political subdivision of any such state, territory or possession; or Ins 3.08(3)(d)3.3. Any agency, authority or corporate or other instrumentality of any one or more of the foregoing, or which are guaranteed by any of the foregoing. Ins 3.08(3)(e)(e) “Municipal bond insurance” means a type of surety insurance authorized by s. Ins 6.75 (2) (g) which is limited to the guaranteeing of the performance and obligations of municipal bonds. Ins 3.08(3)(f)(f) “Municipal bond insurer” means an insurer which issues municipal bond insurance. Ins 3.08(3)(g)(g) “Total net liability” means the average annual amount due, net of reinsurance, for principal and interest on the insured amount of any one issue of municipal bonds. Ins 3.08(3)(h)(h) “Person” means any individual, corporation for profit or not for profit, association, partnership or any other legal entity. Ins 3.08(3)(i)(i) “Policyholders’ surplus” means an insurer’s net worth, the difference between its assets and liabilities, as reported in its annual statement. Ins 3.08(4)(4) Minimum capital or permanent surplus. The minimum capital or permanent surplus of a municipal bond insurer shall be $2 million for an insurer first authorized to do business in Wisconsin on or before January 1, 1984, or the amount required by statute or administrative order after that date for other municipal bond insurers. Ins 3.08(5)(a)(a) Policies of municipal bond insurance shall be issued only to provide coverage on bonds of the type defined in sub. (3) (d). Ins 3.08(5)(b)(b) A municipal bond insurer may not have total net liability in respect to any one issue of municipal bonds in excess of an amount representing 10% of its policyholders’ surplus. Ins 3.08(5)(c)(c) A municipal bond insurer may not have outstanding cumulative net liability, under in-force policies of municipal bond insurance, in an amount which exceeds the sum of: Ins 3.08(5)(d)(d) A municipal bond insurer may not have more than 25% of the principal amount which it has insured represented by the principal amount of municipal bonds issued primarily to finance property for use in a trade or business carried on by any person other than a governmental unit, and secured by a pledge of payments to be made by the person or of revenues to be derived from the trade or business. Ins 3.08(6)(6) Premium. The total consideration charged for municipal bond insurance policies, including policy and other fees or similar charges, shall be considered premium and shall be subject to the reserve requirements of subs. (8) and (9). Ins 3.08(7)(a)(a) The financial condition and operations of a municipal bond insurer shall be reported on the annual statement. Ins 3.08(7)(b)(b) The total contingency reserve required by sub. (9) shall be reported as a liability in the annual statement. This liability may be reported as unpaid losses 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. Ins 3.08(7)(c)(c) A municipal bond insurer shall compute and maintain adequate case basis loss reserves to be reported in the underwriting and investment exhibit, unpaid losses and loss adjustment expenses, of the annual statement. The method used to determine the loss reserve shall accurately reflect loss frequency and loss severity and shall include components for claims reported and unpaid, and for claims incurred but not reported, provided: Ins 3.08(7)(c)1.1. No deduction may be made for anticipated salvage in computing case basis loss reserves. Ins 3.08(7)(c)2.2. If the amount of insured principal and interest on a defaulted issue of municipal bonds which is due and payable over the period of the next 3 years exceeds 10% of a municipal bond insurer’s capital, surplus and contingency reserve, its case basis reserve so established shall be supported by a report from a qualified independent source. Ins 3.08(8)(8) Unearned premium reserve. A municipal bond insurer shall compute and maintain an unearned premium reserve on an annual or on a monthly pro rata basis on all unexpired coverage, except that in the case of premiums paid more than one year in advance, the premium shall be earned proportionally with the expiration of exposure except as provided under sub. (12). Ins 3.08(9)(a)(a) A municipal bond insurer shall establish a contingency reserve which shall consist of allocations of sums representing 50% of the earned premium on policies of municipal bond insurance except as provided under sub. (12). Ins 3.08(9)(b)(b) The contingency reserve established by this subsection shall be maintained for 240 months. That portion of the contingency reserve established and maintained for more than 240 months shall be released and may no longer constitute part of the contingency reserve except as provided under sub. (12). Ins 3.08(9)(c)(c) Subject to the approval of the commissioner, withdrawals may be made from the contingency reserve in any year in which the actual incurred losses on municipal bond insurance policies exceed 35% of the earned premiums on municipal bonds insurance policies except as provided under sub. (12). Ins 3.08(9)(d)(d) A municipal bond insurer may invest the contingency reserve in tax and loss bonds purchased pursuant to 26 USC 832(e). The contingency reserve shall otherwise be invested only in classes of securities or types of investments specified in s. 620.22 (1), Stats., except as provided under sub. (12). Ins 3.08(10)(10) Conflicts of interest prohibited. No municipal bond insurer may pay any commission or make any gift of money, property or other valuable thing to any employee, agent, or representative of any issuer of municipal bonds or to any employee, agent or representative of any underwriter of any issue of the bonds as an inducement to the purchase of, or at any time there is in force, a policy insuring bonds, and no employee, agent or representative of the insurer or underwriter shall receive any payment or gift. However, violation of the provisions of this subsection does not render void the municipal bond insurance policy. Ins 3.08(11)(11) Transition. Unearned premium reserves and contingency loss reserves shall be computed and maintained on risks insured after the effective date of this section as required by subs. (8) and (9). Ins 3.08(12)(12) Laws or regulations of other jurisdictions. Whenever the laws or regulations of another jurisdiction in which a municipal bond insurer is licensed, require a larger unearned premium reserve or a larger contingency reserve in the aggregate than that set forth in this section, the establishment and maintenance of the larger aggregated, unearned premium reserve and contingency reserve complies with this rule. Ins 3.08 HistoryHistory: Emerg. cr. eff. 6-5-84; cr. Register, October, 1984, No. 346, eff. 11-1-84; am. (3) (d) intro., (5) (c) and (9) (c), Register, March, 1986, No. 363, eff. 4-1-86; correction in (3) (a) made under s. 13.93 (2m) (b) 7., Stats., Register, July, 1999, No. 523. Ins 3.09Ins 3.09 Mortgage guaranty insurance. 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)(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)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: 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: 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.
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