Bill Text: IA SF231 | 2017-2018 | 87th General Assembly | Introduced
Bill Title: A bill for an act relating to provisions applicable to life insurance companies and associations, and credit for reinsurance, and including retroactive applicability provisions. (Formerly SSB 1040.)
Sponsorship: Committee Bill
Status: (Introduced - Dead) 2017-03-08 - Withdrawn. S.J. 525. [SF231 Detail]
Download: Iowa-2017-SF231-Introduced.html
Senate File 231 - Introduced SENATE FILE BY COMMITTEE ON COMMERCE (SUCCESSOR TO SSB 1040) A BILL FOR 1 An Act relating to provisions applicable to life insurance 2 companies and associations, and credit for reinsurance, and 3 including retroactive applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 1230SV (1) 87 av/rn/nh PAG LIN 1 1 Section 1. Section 511.8, subsection 22, paragraph b, 1 2 subparagraph (2), subparagraph division (b), Code 2017, is 1 3 amended to read as follows: 1 4 (b) Financial instruments used in hedging transactions 1 5 between an insurer and a conduit which are collateralized by 1 6 obligations eligible under subsection 5 or by cash equivalents 1 7 eligible under subsection 24, other than aclass onerule 1 8 2a=7 money market fund, are eligible only to the extent that 1 9 such securities deposited as collateral are not in excess 1 10 of ten percent of the legal reserve, less any obligations 1 11 eligible under subsection 5 or cash equivalents eligible under 1 12 subsection 24, other than aclass onerule 2a=7 money market 1 13 fund, owned by the insurer or which are the subject of hedging 1 14 transactions by the insurer, that are included in the insurer's 1 15 legal reserve. 1 16 Sec. 2. Section 511.8, subsection 23, paragraph c, Code 1 17 2017, is amended to read as follows: 1 18 c. If the loan is collateralized by cash or cash 1 19 equivalents, the cash or cash equivalent collateral may be 1 20 reinvested by the life insurance company or association in 1 21class onerule 2a=7 money market funds as defined in subsection 1 22 24, individual securities which are eligible for inclusion in 1 23 the legal reserve of the life insurance company or association, 1 24 or in repurchase agreements fully collateralized by such 1 25 securities if the life insurance company or association takes 1 26 delivery of the collateral either directly or through an 1 27 authorized custodian or pooled fund comprised of individual 1 28 securities which are eligible for inclusion in the legal 1 29 reserve of the life insurance company or association. If such 1 30 reinvestment is made in individual securities or in repurchase 1 31 agreements, the individual securities or the securities which 1 32 collateralize the repurchase agreements shall mature in less 1 33 than two hundred seventy days. If such reinvestment is made 1 34 in a pooled fund, the average maturity of the securities 1 35 comprising such pooled fund must be one hundred eighty days or 2 1 less and the individual maturities of the securities comprising 2 2 such pooled fund must be three hundred ninety=seven days or 2 3 less. Individual securities and securities comprising the 2 4 pooled fund shall be investment grade. As used in this 2 5 paragraph, "maturity" means the earlier of the fixed date on 2 6 which the holder of the security is unconditionally entitled to 2 7 receive principal and interest in full or the date on which the 2 8 holder of the security is unconditionally entitled upon demand 2 9 to receive principal and interest in full. 2 10 Sec. 3. Section 511.8, subsection 24, paragraph a, 2 11 subparagraph (2), Code 2017, is amended to read as follows: 2 12 (2)"Class one"Rule 2a=7 money market fund" means 2 13 investments in an open=end management investment company 2 14 registered with the federal securities and exchange commission 2 15 under the federal Investment Company Act of 1940, 15 U.S.C. 2 16 {80a=1 et seq., and operated in accordance with 17 C.F.R. 2 17 {270.2a=7, that qualifies for investment using the bond class 2 18 one reserve factor under the purposes and procedures of the 2 19 national association of insurance commissioners' securities 2 20 valuation office. 2 21 Sec. 4. Section 511.8, subsection 24, paragraphs b and c, 2 22 Code 2017, are amended to read as follows: 2 23 b. Cash equivalents include aclass onerule 2a=7 money 2 24 market fund. 2 25 c. Cash equivalents, other than aclass onerule 2a=7 money 2 26 market fund, are not eligible in excess of two percent of the 2 27 legal reserve in the obligations of any one corporation, and 2 28 are not eligible in excess of ten percent of the legal reserve. 2 29 Sec. 5. Section 521B.102, unnumbered paragraph 1, Code 2 30 2017, is amended to read as follows: 2 31 Credit for reinsurance shall be allowed a domestic ceding 2 32 insurer as either an asset or a reduction from liability on 2 33 account of reinsurance ceded only when the reinsurer meets 2 34 the requirements of subsection 1, 2, 3, 4, 5, or 6. The 2 35 commissioner may adopt rules pursuant to section 521B.105 3 1 specifying additional requirements related to the valuation of 3 2 assets or reserve credits, the amount and forms of security 3 3 supporting reinsurance arrangements described in section 3 4 521B.105, and the circumstances pursuant to which credit shall 3 5 be reduced or eliminated. Credit shall be allowed under 3 6 subsection 1, 2, or 3 only respecting cessions of those kinds 3 7 or classes of business which the assuming insurer is licensed 3 8 or otherwise permitted to write or assume in the insurer's 3 9 state of domicile or, in the case of a United States branch 3 10 of an alien assuming insurer, in the state through which the 3 11 insurer is entered and licensed to transact insurance or 3 12 reinsurance. Credit shall be allowed under subsection 3 or 4 3 13 only if the applicable requirements of subsection 7 have been 3 14 satisfied. 3 15 Sec. 6. Section 521B.103, subsection 1, Code 2017, is 3 16 amended to read as follows: 3 17 1. An asset or a reduction from liability for reinsurance 3 18 ceded by a domestic insurer to an assuming insurer not meeting 3 19 the requirements of section 521B.102, shall be allowed in an 3 20 amount not exceeding the liabilities carried by the ceding 3 21 insurer. The commissioner may adopt rules pursuant to section 3 22 521B.105 specifying requirements related to the valuation of 3 23 assets or reserve credits, the amount and forms of security 3 24 supporting reinsurance arrangements described in section 3 25 521B.105, and the circumstances pursuant to which credit shall 3 26 be reduced or eliminated. The reduction shall be in the amount 3 27 of funds held by or on behalf of the ceding insurer, including 3 28 funds held in trust for the ceding insurer, under a reinsurance 3 29 contract with the assuming insurer as security for the payment 3 30 of obligations under the contract, if the security is held 3 31 in the United States subject to withdrawal solely by, and 3 32 under the exclusive control of, the ceding insurer, or in the 3 33 case of a trust, held in a qualified United States financial 3 34 institution as defined in section 521B.104, subsection 2. 3 35 Sec. 7. Section 521B.105, Code 2017, is amended to read as 4 1 follows: 4 2 521B.105 Rules. 4 3 1. The commissioner may adopt rules, pursuant to chapter 4 4 17A, as necessary or convenient to administer this chapter. 4 5 2. The commissioner is further authorized to adopt rules 4 6 pursuant to chapter 17A that are applicable to reinsurance 4 7 arrangements as follows: 4 8 a. A rule adopted pursuant to this subsection is applicable 4 9 only to reinsurance arrangements relating to the following: 4 10 (1) Life insurance policies with guaranteed nonlevel gross 4 11 premiums or guaranteed nonlevel benefits. 4 12 (2) Universal life insurance policies with provisions 4 13 allowing a policyholder to keep a policy in force over a 4 14 secondary guarantee period. 4 15 (3) Variable annuities with guaranteed death or living 4 16 benefits. 4 17 (4) Long=term care insurance policies. 4 18 (5) Other life and health insurance and annuity products as 4 19 to which the national association of insurance commissioners 4 20 adopts model regulatory requirements with respect to credit for 4 21 reinsurance. 4 22 b. A rule adopted pursuant to paragraph "a", and applicable 4 23 to policies described in paragraph "a", subparagraph (1) or (2), 4 24 is applicable to any reinsurance contract containing either of 4 25 the following: 4 26 (1) Policies issued on or after January 1, 2015. 4 27 (2) Policies issued prior to January 1, 2015, if risk 4 28 pertaining to such policies is ceded in connection with the 4 29 reinsurance contract, in whole or in part, on or after January 4 30 1, 2015. 4 31 c. A rule adopted pursuant to this subsection may require 4 32 the ceding insurer, in calculating the amounts or forms of 4 33 security required to be held under rules adopted under this 4 34 subsection, to use the valuation manual as defined in section 4 35 508.36, including all amendments adopted by the national 5 1 association of insurance commissioners and in effect on 5 2 the date as of which the calculation is made, to the extent 5 3 applicable. 5 4 3. A rule adopted pursuant to this section is not applicable 5 5 to cessions to an assuming insurer that meets either of the 5 6 following requirements: 5 7 a. Is certified in Iowa. 5 8 b. Maintains at least two hundred fifty million dollars 5 9 in capital and surplus when determined in accordance with the 5 10 accounting practices and procedures manual of the national 5 11 association of insurance commissioners, including all 5 12 amendments adopted by the national association of insurance 5 13 commissioners, but excluding the impact of any permitted 5 14 or prescribed practices; and meets either of the following 5 15 requirements: 5 16 (1) Is licensed in at least twenty=six states. 5 17 (2) Is licensed in at least ten states, and is licensed or 5 18 accredited in a total of at least thirty=five states. 5 19 4. The commissioner's authority to adopt rules pursuant 5 20 to subsection 2 does not limit the commissioner's general 5 21 authority to adopt rules pursuant to subsection 1. 5 22 Sec. 8. RETROACTIVE APPLICABILITY. The following provision 5 23 of this Act applies retroactively to January 1, 2015, as to 5 24 specified reinsurance contracts described in section 521B.105, 5 25 subsection 2, paragraph "b", as enacted in this Act: 5 26 1. The section of this Act amending section 521B.105. 5 27 EXPLANATION 5 28 The inclusion of this explanation does not constitute agreement with 5 29 the explanation's substance by the members of the general assembly. 5 30 This bill relates to provisions applicable to life insurance 5 31 companies and associations and credit for reinsurance, and 5 32 contains a retroactive applicability provision. 5 33 The bill makes changes in Code section 511.8 by renaming a 5 34 money market fund that is referred to in the provision. 5 35 The bill makes changes in several provisions of Code 6 1 chapter 521B, giving the commissioner of insurance specific 6 2 authorization to adopt rules applicable to reinsurance 6 3 arrangements, in addition to the commissioner's existing 6 4 authorization to adopt rules to administer the Code chapter. 6 5 The amendments to Code section 521B.105 are made 6 6 retroactively applicable to January 1, 2015, as to rules that 6 7 are adopted and are applicable to certain specified life 6 8 insurance policies with reinsurance contracts containing 6 9 policies issued on or after January 1, 2015, or policies issued 6 10 prior to January 1, 2015, if risk pertaining to the policies is 6 11 ceded in connection with the reinsurance contract on or after 6 12 January 1, 2015. 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