71st OREGON LEGISLATIVE ASSEMBLY--2001 Regular Session
NOTE: Matter within { + braces and plus signs + } in an
amended section is new. Matter within { - braces and minus
signs - } is existing law to be omitted. New sections are within
{ + braces and plus signs + } .
LC 598
A-Engrossed
Senate Bill 267
Ordered by the Senate March 6
Including Senate Amendments dated March 6
Printed pursuant to Senate Interim Rule 213.28 by order of the
President of the Senate in conformance with presession filing
rules, indicating neither advocacy nor opposition on the part
of the President (at the request of Governor John A. Kitzhaber,
M.D., for Department of Consumer and Business Services)
SUMMARY
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure.
Increases minimum requirements for capital and surplus holdings
of certain insurers, including health care service contractors.
Deletes certain statutory accounting principles and authorizes
Director of Department of Consumer and Business Services to adopt
standards. Authorizes director to require health care service
contractors to possess and maintain capital or surplus, or
combination, in excess of statutory amount if director determines
that greater amount is necessary for maintaining solvency
according to standards established by rule. Increases state
authority to compel security from alien reinsurers and to enforce
state requirements regarding claims against insolvent alien
insurers and otherwise conforms statutes governing insurer credit
for reinsurance regarding trust funds. Allows credit for
reinsurance when reinsurance agreement provides, in event of
insolvency of ceding insurer, that reinsurance be paid to payee
other than liquidator. Allows assessment of member employers of
multiple employer welfare arrangement in event of receivership.
{ + Provides for confidentiality of certain information
supplied by health care service contractors. + }
A BILL FOR AN ACT
Relating to insurance financial regulation; creating new
provisions; amending ORS 731.508, 731.509, 731.510, 731.554,
731.562, 731.566, 731.752, 731.754, 733.010, 733.020, 733.090,
733.100, 733.160, 733.165, 743.186, 750.045 and 750.321; and
repealing ORS 731.568 and 733.660.
Be It Enacted by the People of the State of Oregon:
SECTION 1. ORS 731.554 is amended to read:
731.554. (1) Except as provided in subsections (2) to (6) of
this section and ORS 731.562 and 731.566, to qualify for
authority to transact insurance in this state an insurer shall
possess and thereafter maintain capital or surplus, or any
combination thereof, of not less than { - $1 - } { + $2.5 + }
million.
(2) An insurer transacting any workers' compensation insurance
business shall possess and thereafter maintain capital or
surplus, or any combination thereof, of not less than
{ - $3 - } { + $5 + } million.
(3) An insurer transacting mortgage insurance shall possess and
thereafter maintain capital or surplus, or any combination
thereof, of not less than $4 million.
(4) A home protection insurer shall possess and thereafter
maintain capital or surplus, or any combination thereof, of not
less than 10 percent of the aggregate of premiums charged on its
policies currently in force, but the required amount shall not be
less than { - $40,000 - } { + $250,000 + } or more than $1
million.
(5) A domestic insurer applying for its original certificate of
authority in this state shall possess, when first so authorized,
additional capital or surplus, or any combination thereof, of not
less than $500,000. However, the additional amount in the case of
a home protection insurer shall be not less than $10,000.
(6) For the protection of the public, the Director of the
Department of Consumer and Business Services may require an
insurer to possess and maintain capital or surplus, or any
combination thereof, in excess of the amount otherwise required
under this section, ORS 731.562 or 731.566, owing to the type,
volume and nature of insurance business transacted by the
insurer, if the director determines that the greater amount is
necessary for maintaining the insurer's solvency according to
standards established by rule. In developing such standards, the
director shall consider model standards adopted by the National
Association of Insurance Commissioners. For the purpose of
determining the reasonableness and adequacy of an insurer's
capital and surplus, the director must consider at least the
following factors, as applicable:
(a) The size of the insurer, as measured by its assets, capital
and surplus, reserves, premium writings, insurance in force and
other appropriate criteria.
(b) The extent to which the business of the insurer is
diversified among the several lines of insurance.
(c) The number and size of risks insured in each line of
business.
(d) The extent of the geographical dispersion of the insured
risks of the insurer.
(e) The nature and extent of the reinsurance program of the
insurer.
(f) The quality, diversification and liquidity of the
investment portfolio of the insurer.
(g) The recent past and projected future trend in the size of
the investment portfolio of the insurer.
(h) The combined capital and surplus maintained by other
comparable insurers.
(i) The adequacy of the reserves of the insurer.
(j) The quality and liquidity of investments in affiliates.
The director may treat any such investment as a disallowed asset
for purposes of determining the adequacy of combined capital and
surplus whenever in the judgment of the director the investment
so warrants.
(k) The quality of the earnings of the insurer and the extent
to which the reported earnings include extraordinary items.
SECTION 2. ORS 731.562 is amended to read:
731.562. To qualify for authority to transact title insurance
in this state, an insurer shall possess and thereafter maintain
capital or surplus, or any combination thereof, of not less than
{ - $500,000 - } { + $2.5 million + }.
SECTION 3. ORS 731.566 is amended to read:
731.566. To qualify for authority to transact insurance in this
state, a reciprocal insurer shall possess and thereafter maintain
a surplus of not less than { - $1 - } { + $2.5 + } million,
and any reciprocal insurer that exchanges policies of insurance
covering workers' compensation insurance shall possess and
thereafter maintain a surplus of not less than { - $3 - }
{ + $5 + } million.
SECTION 4. { + ORS 731.568 is repealed. + }
SECTION 5. { + (1) To qualify for authority to transact
insurance in this state on and after the effective date of this
2001 Act, an insurer that is not authorized to transact insurance
in this state on the day before the effective date of this 2001
Act must possess and thereafter maintain the applicable capital
and surplus required by ORS 731.554, 731.562 and 731.566, as
amended by sections 1 to 3 of this 2001 Act.
(2) To qualify for authority to transact health care services
in this state on and after the effective date of this 2001 Act, a
health care service contractor that is not authorized to transact
health care services in this state on the day before the
effective date of this 2001 Act must possess and thereafter
maintain the applicable capital and surplus required by ORS
750.045, as amended by section 6 of this 2001 Act.
(3) An insurer that is authorized to transact insurance in this
state on the day before the effective date of this 2001 Act and
that possesses on that date the applicable capital and surplus
required under ORS 731.554, 731.562 and 731.566, as amended by
sections 1 to 3 of this 2001 Act, must thereafter maintain that
capital and surplus.
(4) A health care service contractor that is authorized to
transact health care services in this state on the day before the
effective date of this 2001 Act and that possesses on that date
the applicable capital and surplus required under ORS 750.045, as
amended by section 6 of this 2001 Act, must thereafter maintain
that capital and surplus.
(5) Notwithstanding the effective date of this 2001 Act, an
insurer that is authorized to transact insurance in this state on
the day before the effective date of this 2001 Act and that does
not possess on the effective date of this 2001 Act the applicable
capital and surplus required under ORS 731.554 (1) and (2),
731.562 and 731.566, as amended by sections 1 to 3 of this 2001
Act, must possess and maintain at least the amounts of capital
and surplus as follows:
(a) For insurers other than insurers transacting workers'
compensation insurance:
(A) $1,300,000, not later than December 31, 2002.
(B) $1,600,000, not later than December 31, 2003.
(C) $1,900,000, not later than December 31, 2004.
(D) $2,200,000, not later than December 31, 2005.
(E) $2,500,000, not later than December 31, 2006.
(b) For insurers transacting workers' compensation insurance:
(A) $3,400,000, not later than December 31, 2002.
(B) $3,800,000, not later than December 31, 2003.
(C) $4,200,000, not later than December 31, 2004.
(D) $4,600,000, not later than December 31, 2005.
(E) $5,000,000, not later than December 31, 2006.
(6) Notwithstanding the effective date of this 2001 Act, a
health care service contractor that is authorized to transact
health care services in this state on the day before the
effective date of this 2001 Act and that does not possess on the
effective date of this 2001 Act the applicable capital and
surplus required under ORS 750.045, as amended by section 6 of
this 2001 Act, must possess and maintain at least the amounts of
capital and surplus as follows:
(a) As of each date specified in this paragraph, a health care
service contractor other than one to which ORS 750.045 (3)
applies shall possess and maintain capital or surplus, or any
combination thereof, of not less than the minimum amount
specified in connection with the date or an amount equal to 50
percent of the average claims as defined in ORS 750.005 (5) for
the preceding 12-month period, whichever is greater. The required
amount of capital and surplus for each date, however, shall not
be more than the maximum amount specified in connection with that
date. The dates and minimum and maximum required amounts of
capital and surplus are as follows:
(A) As of December 31, 2002, not less than $650,000 and not
more than $1,300,000.
(B) As of December 31, 2003, not less than $800,000 and not
more than $1,600,000.
(C) As of December 31, 2004, not less than $950,000 and not
more than $1,900,000.
(D) As of December 31, 2005, not less than $1,100,000 and not
more than $2,200,000.
(E) As of December 31, 2006, not less than $2,500,000.
(b) As of each date specified in this paragraph, a health care
service contractor to which ORS 750.045 (3) applies shall possess
and maintain capital or surplus, or any combination thereof, of
not less than the minimum amount specified in connection with the
date or an amount equal to 50 percent of the average claims as
defined in ORS 750.005 (5) for the preceding 12-month period,
whichever is greater. The required amount of capital and surplus
for each date, however, shall not be more than the maximum amount
specified in connection with that date. The dates and minimum and
maximum required amounts of capital and surplus are as follows:
(A) As of December 31, 2002, not less than $300,000 and not
more than $600,000.
(B) As of December 31, 2003, not less than $350,000 and not
more than $700,000.
(C) As of December 31, 2004, not less than $400,000 and not
more than $800,000.
(D) As of December 31, 2005, not less than $450,000 and not
more than $900,000.
(E) As of December 31, 2006, not less than $1 million.
(7) An insurer authorized to transact insurance in this state
on the day before the effective date of this 2001 Act shall not
be granted authority to transact any other or additional class of
insurance until the insurer complies with the applicable
provisions of ORS 731.554, 731.562 or 731.566, as amended by
sections 1 to 3 of this 2001 Act.
(8) An insurer or health care service contractor authorized to
transact insurance or health care services in this state on the
day before the effective date of this 2001 Act that reapplies for
a certificate of authority after having a certificate of
authority revoked for any cause shall not be granted authority to
transact any insurance or health care services until the insurer
or health care service contractor complies with the applicable
provisions of ORS 731.554, 731.562, 731.566 or 750.045, as
amended by sections 1 to 3 and 6 of this 2001 Act.
(9) If an insurer to which subsection (5) of this section
applies or a health care service contractor to which subsection
(6) of this section applies does not possess and maintain the
minimum amount of capital and surplus required by ORS 731.554 (1)
and (2), 731.562, 731.566 and 750.045, as amended by sections 1
to 3 and 6 of this 2001 Act, on or before December 31, 2006, the
insurer or health care service contractor may apply to the
Director of the Department of Consumer and Business Services for
an extension of time within which to attain the amount. The
application must state the reasons for the failure to attain the
required minimum amount, the date by which the amount is expected
to be attained and the means and likelihood of attaining the
amount by that date. The director may grant the extension if the
director determines that the extension is reasonable and
appropriate in the circumstances, taking into account factors
that include but are not limited to the following:
(a) Whether the insurer or health care service contractor has
made reasonable progress toward attaining the required minimum
amount during the time periods specified in this section; and
(b) Whether the insurer or health care service contractor is
likely to attain the required minimum amount by the date proposed
by the insurer or health care service contractor. + }
SECTION 6. ORS 750.045 is amended to read:
750.045. (1) A health care service contractor { - which - }
{ + that + } is a for-profit or not-for-profit corporation shall
possess and thereafter maintain capital or surplus, or any
combination thereof, of not less than { - $250,000 or an amount
equal to 50 percent of the average claims as defined in ORS
750.005 (5) for the preceding 12-month period, whichever is
greater, but in no case shall the required amount be more than
$500,000 - } { + $2.5 million + }.
(2) A health care service contractor { - which - }
{ + that + } is a for-profit or not-for-profit corporation shall
file a surety bond or such other bond or securities in the sum of
$250,000 as are authorized by the Insurance Code as a guarantee
of the due execution of the policies to be entered into by such
contractor in accordance with ORS 750.005 to 750.095. In lieu of
such bond or securities, a health care service contractor may
file an irrevocable letter of credit issued by an insured
institution as defined in ORS 706.008 in the sum of $250,000.
This subsection does not apply to a health care service
contractor that has at least 75 percent of its assets invested in
health care service facilities pursuant to ORS 733.700.
(3) Subsections (1) and (2) of this section do not apply to
{ - emergency medical service, - } { + a health care service
contractor furnishing only + } dental service or optometrical
service operated on a for-profit or not-for-profit basis if:
(a) The services referred to in this subsection maintain
capital or surplus, or any combination thereof, of not less than
{ - $50,000 or an amount equal to 50 percent of the average
claims as defined in ORS 750.005 (5) for the preceding 12-month
period whichever is greater, but in no case shall the required
amount be more than $500,000 - } { + $1 million + }.
(b) The services referred to in this subsection file a surety
bond or other such bond or securities in the sum of $50,000 as
are authorized by the Insurance Code as a guarantee of the due
execution of the policies to be entered into by such contractor
in accordance with ORS 750.005 to 750.095.
{ + (4) A health care service contractor that is a for-profit
or not-for-profit corporation applying for its original
certificate of authority in this state shall possess, when first
so authorized, additional capital or surplus, or any combination
thereof, of not less than $500,000.
(5) For the protection of the public, the Director of the
Department of Consumer and Business Services may require a health
care service contractor to possess and maintain capital or
surplus, or any combination thereof, in excess of the amount
otherwise required under this section owing to the type, volume
and nature of insurance business transacted by the health care
service contractor, if the director determines that the greater
amount is necessary for maintaining the health care service
contractor's solvency according to standards established by rule.
In developing such standards, the director shall consider model
standards adopted by the National Association of Insurance
Commissioners or its successor organization. For the purpose of
determining the reasonableness and adequacy of a health care
service contractor's capital and surplus, the director must
consider at least the following factors, as applicable:
(a) The size of the health care service contractor, as measured
by its assets, capital and surplus, reserves, premium writings,
insurance in force and other appropriate criteria.
(b) The number of lives insured.
(c) The extent of the geographical dispersion of the lives
insured by the health care service contractor.
(d) The nature and extent of the reinsurance program of the
health care service contractor.
(e) The quality, diversification and liquidity of the
investment portfolio of the health care service contractor.
(f) The recent past and projected future trend in the size of
the investment portfolio of the health care service contractor.
(g) The combined capital and surplus maintained by comparable
health care service contractors.
(h) The adequacy of the reserves of the health care service
contractor.
(i) The quality and liquidity of investments in affiliates.
The director may treat any such investment as a disallowed asset
for purposes of determining the adequacy of combined capital and
surplus whenever in the judgment of the director the investment
so warrants.
(j) The quality of the earnings of the health care service
contractor and the extent to which the reported earnings include
extraordinary items. + }
SECTION 7. ORS 733.010 is amended to read:
733.010. In any determination of the financial condition of an
insurer, there shall be allowed as assets only such assets as are
owned by the insurer and which consist of:
(1) Cash in the possession or control of the insurer, including
the true balance of any deposit in a solvent bank or trust
company.
(2) Investments held in accordance with the Insurance Code, and
due or accrued income items in connection therewith to the extent
considered by the Director of the Department of Consumer and
Business Services to be collectible.
(3) Premium notes, policy loans, liens and other like policy
assets on life insurance policies and accrued interest thereon,
in an amount not exceeding the loan value of the policy.
(4) Due premiums, deferred premiums, installment premiums, and
written obligations taken for premiums, to the extent allowed by
the director.
(5) The amount recoverable from a reinsurer if credit for
reinsurance may be allowed to the insurer under ORS 731.509 or
731.510 and amounts receivable on assumed reinsurance
representing funds withheld by a solvent ceding insurer under a
reinsurance treaty.
(6) Deposits or equities recoverable from underwriting
associations, syndicates and reinsurance funds, or from any
suspended banking institution, to the extent deemed by the
director to be available for the payment of losses and claims.
{ - (7) The unaccrued portion of taxes paid prior to the due
date on real property. - }
{ - (8) - } { + (7) + } Other assets considered by the
director to be available for the payment of losses and claims, at
values determined by the director.
SECTION 8. ORS 733.020 is amended to read:
733.020. In addition to assets impliedly excluded by ORS
733.010, the following expressly shall not be allowed as assets
in any determination of the financial condition of an insurer:
{ - (1) Good will, trade names and other like intangible
assets. - }
{ - (2) - } { + (1) + } Advances to officers, other than
policy loans, whether secured or not, and advances to employees,
agents and other persons on personal security only.
{ - (3) - } { + (2) + } Stock of such insurer owned by it,
or any material equity therein or loans secured thereby, or any
material proportionate interest in such stock acquired or held
through the ownership by such insurer of an interest in another
firm, corporation or business unit.
{ - (4) - } { + (3) + } Tangible personal property, except
such property as the insurer is otherwise permitted to acquire
and retain as an investment under the Insurance Code and which is
deemed by the Director of the Department of Consumer and Business
Services to be available for the payment of losses and claims or
which is otherwise expressly allowable, in whole or in part, as
an asset.
{ - (5) - } { + (4) + } The amount, if any, by which the
book value of any investment as carried in the ledger assets of
the insurer exceeds the value thereof as determined under the
Insurance Code.
SECTION 9. ORS 733.090 is amended to read:
733.090. (1) Each title insurer shall maintain a reserve for
unearned premiums on its policies in force, which shall be
charged as a liability in any determination of its financial
condition. Such unearned premium liability shall be separate
from and in addition to the insurer's liability for incurred but
unpaid losses and loss expenses.
(2) The amount of the unearned premium reserve shall be
determined { - as follows: - } { + according to accounting
procedures approved or required by the Director of the Department
of Consumer and Business Services. + }
{ - (a) For each domestic title insurer, the reserve shall
equal three percent of all gross premiums on title insurance
policies issued by it during the preceding 15 years. - }
{ - (b) For each foreign or alien title insurer, the reserve
relating to its policies insuring titles to real property in this
state shall equal three percent of all gross premiums on such
policies issued by it during the preceding 15 years. The portion
of the unearned premium reserve of a foreign insurer relating to
its policies insuring real property located elsewhere shall be as
prescribed or permitted by the laws of the insurer's domicile,
unless found by the Director of the Department of Consumer and
Business Services to be inadequate for the reasonable protection
of the insurer's policyholders in this state. In the event of
such a finding, the insurer shall maintain unearned premium
reserves upon such business thereafter written in an amount not
less than the reserves required on its business in this
state. - }
(3) A separate and distinct fund, known as the Title Insurance
Unearned Premium Reserve Fund, shall be maintained by each title
insurer in its treasury, as additional security to holders of its
title insurance policies. The amount of the fund shall at least
equal the amount of the unearned premium reserve liability
determined in accordance with subsection (2) of this section.
This fund shall be in addition to the insurer's deposit with the
Department of Consumer and Business Services and deposits
required to be maintained with officials of other jurisdictions.
The fund, to the extent of the unearned premium reserve on
business in this state, shall be invested as provided for funds
of a domestic insurer, except that ORS 733.630, 733.670 and
733.690 shall not be applicable to investment of the fund. The
remainder of the fund may be similarly invested, or may be
invested as permitted by the laws of the insurer's domicile. The
insurer shall keep a separate record of the cash and investments
of the fund, giving complete identification of the assets
belonging to the fund and showing full particulars as to
withdrawals and additions. No title insurance policies shall be
issued by an insurer during a period when its unearned premium
reserve fund is below the required amount.
SECTION 10. ORS 733.100 is amended to read:
733.100. A mortgage insurer shall establish a contingency
reserve liability for the protection of policyholders against the
effect of adverse economic cycles { + according to accounting
procedures approved or required by the Director of the Department
of Consumer and Business Services + }. { - The contingency
reserve shall be maintained out of net premiums received (gross
premiums less premiums returned to policyholders) less the
unearned premium reserve applicable thereto. The amount of the
contingency reserve shall equal 50 percent of all such net earned
premiums on policies of mortgage insurance issued by the insurer
during the preceding 10 years. - }
SECTION 11. ORS 733.160 is amended to read:
733.160. (1) Each bond or other evidence of debt having a fixed
term and rate of interest may be valued as follows, if amply
secured and not in default as to principal or interest:
(a) If purchased at par, at the par value.
(b) If purchased above or below par, { - according to either
of the following methods: - }
{ - (A) On the basis of the purchase price adjusted so as to
bring the value to par at maturity and so as to yield in the
meantime the effective rate of interest at which the purchase was
made; or - }
{ - (B) - } according to an accepted method of valuation
approved by the Director of the Department of Consumer and
Business Services.
(2) For the purpose of subsection (1) of this section, the
purchase price shall not be a higher amount than the actual
market value at the time of purchase, plus actual brokerage,
transfer, postage or express charges paid in the acquisition of
such bond or other evidence of debt.
(3) For purposes of subsections (1) and (2) of this section,
the director may determine the method of calculating values. The
method or valuation may not be inconsistent with any applicable
method or valuation used by insurers in general or any such
method or valuation then currently formulated or approved by the
National Association of Insurance Commissioners or its successor
organization.
(4) Real property shall be valued as follows:
(a) Real property acquired pursuant to a mortgage loan or
contract of sale shall be valued at an amount not greater than
the unpaid principal of the defaulted loan or contract at the
date of such acquisition, together with any taxes and expenses
paid or incurred in connection with such acquisition, and the
cost of improvements thereafter made by the insurer and any
amounts thereafter paid by the insurer on assessments levied for
improvements in connection with the property.
(b) Other real property held by an insurer shall be valued at
an amount not in excess of the cost of the acquired property and
the cost of improvements thereafter made by the insurer, less a
reasonable allowance for depreciation.
(5) Purchase money mortgages on real property referred to in
subsection (4)(a) of this section shall be valued in an amount
not exceeding the acquisition cost of the real property covered
thereby or 90 percent of the fair value of such real property,
whichever is less.
(6) Other assets, other than securities, shall be valued at
cost of acquisition less any repaid portion thereof, unless the
director determines that another value is proper.
SECTION 12. ORS 743.186 is amended to read:
743.186. (1) A life insurance policy shall contain a provision
that after three full years' premiums have been paid and after
the policy has a cash surrender value and while no premium is in
default beyond the grace period for payment, the insurer will
advance, on proper assignment or pledge of the policy and on the
sole security thereof, an amount equal to or, at the option of
the party entitled thereto, less than the loan value of the
policy, at a rate of interest not exceeding the maximum rate
permitted by the policy loan provision. The interest rate
provision shall comply with ORS 743.187. The loan value of the
policy shall be equal to the cash surrender value at the end of
the then current policy year, less any existing indebtedness not
already deducted in determining such cash surrender value
including any interest then accrued but not due, any unpaid
balance of the premium for the current policy year, and interest
on the loan to the end of the current policy year. The policy may
also provide that:
(a) { - If - } Interest on any indebtedness { - is not
paid when due it - } { + that is 90 or more days past due + }
shall be added to the existing indebtedness and shall bear
interest at the rate applicable to the existing indebtedness; and
(b) Except as provided in ORS 743.187, if the total
indebtedness on the policy, including interest due or accrued,
equals or exceeds the amount of the loan value of the policy, the
policy shall terminate and become void upon 30 days' notice by
the insurer mailed to the last-known address of the insured or
other policy owner and of any assignee of record at the home
office of the insurer.
(2) The policy shall reserve to the insurer the right to defer
the granting of a loan, other than for the payment of any premium
to the insurer, for six months after application therefor.
(3) The policy, at the insurer's option, may provide for
automatic premium loan.
(4) This section does not apply to term insurance policies or
term insurance benefits provided by rider or supplemental policy
provisions, or to industrial life insurance policies.
SECTION 13. { + ORS 733.660 is repealed. + }
SECTION 14. ORS 731.508 is amended to read:
731.508. (1) An insurer may accept reinsurance only of such
risks, and retain risk thereon within such limits, as it is
otherwise authorized to insure.
(2) Except as provided in ORS 731.512, 732.517 to 732.546 or
742.150 to 742.162, an insurer may reinsure risks with an insurer
authorized to transact such insurance in this state, or in any
other solvent insurer approved or accepted by the Director of the
Department of Consumer and Business Services for the purpose of
such reinsurance. The director shall not approve or accept any
such reinsurance by a ceding domestic insurer in an unauthorized
insurer which the director finds for good cause would be contrary
to the interests of the policyholders or stockholders of such
domestic insurer.
(3) Credit shall not be allowed, as an asset or as a deduction
from liability, to any ceding insurer for reinsurance unless the
reinsurance { - is payable by the assuming insurer according to
the following conditions: - } { + contract provides, in
substance, that in the event of the insolvency of the ceding
insurer, the reinsurance shall be payable under a contract or
contracts reinsured by the assuming insurer on the basis of
reported claims allowed by the court hearing the liquidation
proceeding, without diminution because of the insolvency of the
ceding insurer. Such payments shall be made directly to the
ceding insurer or to its domiciliary liquidator except:
(a) When the contract or other written agreement specifically
provides another payee of the reinsurance in the event of the
insolvency of the ceding insurer; or
(b) When the assuming insurer, with the consent of the direct
insured or insureds, has assumed the policy obligations of the
ceding insurer as direct obligations of the assuming insurer to
the payees under such policies and in substitution for the
obligations of the ceding insurer to such payees.
(4) For the purposes of subsection (3) of this section, the
reinsurance agreement may provide that the domiciliary liquidator
of an insolvent ceding insurer shall, within a reasonable time
after the claim is filed in the liquidation proceeding, give
written notice to the assuming insurer of the pendency of a claim
against the ceding insurer on the contract reinsured. During the
pendency of the claim, an assuming insurer may investigate the
claim and interpose, at its own expense, in the proceeding in
which the claim is to be adjudicated any defenses that the
assuming insurer determines to be available to the ceding insurer
or its liquidator. The expense may be filed as a claim against
the insolvent ceding insurer to the extent of a proportionate
share of the benefit that may accrue to the ceding insurer solely
as a result of the defense undertaken by the assuming insurer.
When two or more assuming insurers are involved in the same claim
and a majority in interest elect to interpose one or more
defenses to the claim, the expense shall be apportioned in
accordance with the terms of the reinsurance agreement as though
the expense had been incurred by the ceding insurer. + }
{ - (a) The reinsurance must be payable on the basis of the
liability of the ceding insurer under the contracts reinsured
without diminution because of the insolvency of the ceding
insurer. - }
{ - (b) The reinsurance must be payable only to the ceding
insurer or to the statutory successor or receiver of the ceding
insurer. - }
{ - (4) Notwithstanding subsection (3)(b) of this section,
when a reinsurance agreement contains a provision for issuance of
an indorsement allowing payment to a payee other than a ceding
insurer or the statutory successor or receiver, credit shall be
allowed as an asset or as a deduction from liability to a ceding
insurer with respect to policies for which such an indorsement
has not been issued. With respect to policies for which such an
indorsement has been issued, credit shall not be allowed for
losses and loss adjustment expenses but shall be allowed for
unearned premium reserves. - }
{ - (5) An insurer must show compliance with the following
requirements for policies with respect to which an indorsement
described in subsection (4) of this section has been issued: - }
{ - (a) The indorsement for payment to the other payee must
be for the purpose of covering only property losses on real
property or covering only losses owing to failure of performance,
including fidelity of persons, guaranteed by a surety. - }
{ - (b) The indorsement must be indicated on the declarations
page of each policy or attached to each policy and must be made a
part of the policy. If an indorsement is issued after issuance of
the policy, the indorsement must be provided to the
policyholder. - }
{ - (c) The ceding insurer must have submitted its procedure
for issuing and accounting for the indorsement form to the
director and the procedure must have received the approval of the
director. - }
{ - (6) - } { + (5) + } The director may disallow credit
that would otherwise be allowed if the director determines that
allowing credit would be contrary to accurate financial reporting
or proper financial management, or may be hazardous to
policyholders of the insurer or the insurance-buying public
generally. The director may make such a determination only
according to standards established by the director by rule. This
subsection applies only to insurers who transact life insurance
or health insurance, or both.
{ - (7) - } { + (6) + } Upon request of the director, a
ceding insurer promptly shall inform the director in writing of
the cancellation or any other material change of any of its
reinsurance treaties or arrangements.
{ - (8) - } { + (7) + } This section does not apply to wet
marine and transportation insurance.
SECTION 15. ORS 731.509 is amended to read:
731.509. { + (1) The purpose of ORS 731.509, 731.510, 731.511,
731.512 and 731.516 is to protect the interests of insureds,
claimants, ceding insurers, assuming insurers and the public
generally. The Legislative Assembly declares that its intent is
to ensure adequate regulation of insurers and reinsurers and
adequate protection for those to whom they owe obligations. In
furtherance of that state interest, the Legislative Assembly
mandates that upon the insolvency of an alien insurer or
reinsurer that provides security to fund its United States
obligations in accordance with ORS 731.509, 731.510, 731.511,
731.512 and 731.516, the assets representing the security shall
be maintained in the United States and claims shall be filed with
and valued by the state insurance commissioner with regulatory
oversight, and the assets shall be distributed in accordance with
the insurance laws of the state in which the trust is domiciled
that are applicable to the liquidation of domestic United States
insurers. The Legislative Assembly declares that the laws
contained in ORS 731.509, 731.510, 731.511, 731.512 and 731.516
are fundamental to the business of insurance in accordance with
15 U.S.C. 1011 and 1012. + }
{ - (1) - } { + (2) + } The Director of the Department of
Consumer and Business Services shall not allow credit for
reinsurance to a domestic ceding insurer as either an asset or a
reduction from liability on account of reinsurance ceded unless
credit is allowed as provided under ORS 731.508 and unless the
reinsurer meets the requirements of:
(a) Subsection { - (2) - } { + (3) + } of this section;
(b) Subsection { - (3) - } { + (4) + } of this section;
(c) Subsections { - (4) - } { + (5) + } and { - (7) - }
{ + (8) + } of this section;
(d) Subsections { - (5) - } { + (6) + } and { - (7) - }
{ + (8) + } of this section; or
(e) Subsection { - (6) - } { + (7) + } of this section.
{ - (2) - } { + (3) + } Credit shall be allowed when the
reinsurance is ceded to an authorized assuming insurer that
accepts reinsurance of risks, and retains risk thereon within
such limits, as the assuming insurer is otherwise authorized to
insure in this state as provided in ORS 731.508.
{ - (3) - } { + (4) + } Credit shall be allowed when the
reinsurance is ceded to an assuming insurer that is accredited as
a reinsurer in this state as provided in ORS 731.511. The
director shall not allow credit to a domestic ceding insurer if
the accreditation of the assuming insurer has been revoked by the
director { + after notice and opportunity for hearing + }.
{ - (4) - } { + (5) + } Credit shall be allowed when the
reinsurance is ceded to a foreign assuming insurer or a United
States branch of an alien assuming insurer meeting all of the
following requirements:
(a) The foreign assuming insurer must be domiciled in { - and
licensed or authorized by - } a state employing standards
regarding credit for reinsurance that equal or exceed the
standards applicable under this section. The United States branch
of an alien assuming insurer must be entered through a state
employing such standards.
(b) The foreign assuming insurer or United States branch of an
alien assuming insurer must maintain a combined capital and
surplus in an amount not less than $20,000,000. The requirement
of this paragraph does not apply to reinsurance ceded and assumed
pursuant to pooling arrangements among insurers in the same
holding company system.
(c) The foreign assuming insurer or United States branch of an
alien assuming insurer must submit to the authority of the
director to examine its books and records.
{ - (5) - } { + (6) + } Credit shall be allowed when the
reinsurance is ceded to an assuming insurer that maintains a
trust fund meeting the requirements of this subsection and
additionally complies with other requirements of this subsection.
The trust fund must be maintained in a qualified United States
financial institution, as defined in ORS 731.510 (1), for the
payment of the valid claims of its United States policyholders
and ceding insurers and their assigns and successors in interest.
The assuming insurer must report annually to the director
information substantially the same as that required to be
reported on the annual statement form by ORS 731.574 by
authorized insurers, in order to enable the director to determine
the sufficiency of the trust fund. The following requirements
apply to such a trust { + fund + }:
(a) In the case of a single assuming insurer, the trust
{ + fund + } must consist of { - a trusteed account
representing the assuming liabilities of the insurer attributable
to business written in the United States - } { + funds in trust
in an amount not less than the assuming insurer's liabilities
attributable to reinsurance ceded by United States ceding
insurers + }. In addition, { - such an - } { + the + }
assuming insurer must maintain a trusteed surplus of not less
than $20,000,000.
{ - (b) In the case of a group that includes incorporated and
individual unincorporated underwriters, the trust must consist of
a trusteed account representing the liabilities of the group
attributable to business written in the United States. In
addition, the group must maintain a trusteed surplus of which
$100,000,000 must be held jointly for the benefit of United
States ceding insurers of any member of the group. The
incorporated members of the group shall not be engaged in any
business other than underwriting as a member of the group and
shall be subject to the same level of solvency regulation and
control by the group's domiciliary regulators as are the
unincorporated members. The group shall make available to the
director an annual certification of the solvency of each
underwriter by the domiciliary regulator of the group and its
independent certified public accountant. - }
{ + (b) In the case of a group including incorporated and
individual unincorporated underwriters:
(A) For reinsurance ceded under reinsurance agreements with an
inception, amendment or renewal date on or after August 1, 1995,
the trust shall consist of a trusteed account in an amount not
less than the group's several liabilities attributable to
business ceded by United States domiciled ceding insurers to any
member of the group.
(B) For reinsurance ceded under reinsurance agreements with an
inception date on or before July 31, 1995, and not amended or
renewed after that date, notwithstanding the other provisions of
ORS 731.509, 731.510, 731.511, 731.512 and 731.516, the trust
shall consist of a trusteed account in an amount not less than
the group's several insurance and reinsurance liabilities
attributable to business written in the United States.
(C) In addition to the trusts described in subparagraphs (A)
and (B) of this paragraph, the group shall maintain in trust a
trusteed surplus of which $100,000,000 shall be held jointly for
the benefit of the United States domiciled ceding insurers of any
member of the group for all years of account.
(D) The incorporated members of the group shall not be engaged
in any business other than underwriting as a member of the group
and shall be subject to the same level of regulation and solvency
control by the group's domiciliary regulator as are the
unincorporated members.
(E) Within 90 days after the group's financial statements are
due to be filed with the group's domiciliary regulator, the group
shall provide to the director an annual certification by the
group's domiciliary regulator of the solvency of each underwriter
member or, if certification is unavailable, financial statements
of each underwriter member of the group prepared by independent
certified public accountants. + }
(c) In the case of a group of incorporated insurers described
in this paragraph, the trust must be in an amount equal to the
group's several liabilities attributable to business ceded by
United States ceding insurers to any member of the group pursuant
to reinsurance contracts issued in the name of the group. This
paragraph applies to a group of incorporated insurers under
common administration that complies with the annual reporting
requirements contained in this subsection and that has
continuously transacted an insurance business outside the United
States for at least three years immediately prior to making
application for accreditation. Such a group must have an
aggregate policyholders' surplus of $10,000,000,000 and must
submit to the authority of this state to examine its books and
records and bear the expense of the examination. The group shall
also maintain a joint trusteed surplus of which $100,000,000 must
be held jointly for the benefit of United States ceding insurers
of any member of the group as additional security for any such
liabilities. Each member of the group shall make available to the
director an annual certification of the member's solvency by the
member's domiciliary regulator and its independent certified
public accountant.
(d) { - The trust must be established in a form approved by
the director. - } { + The form of the trust and any amendment
to the trust shall have been approved by the insurance
commissioner of the state in which the trust is domiciled or by
the insurance commissioner of another state who, pursuant to the
terms of the trust instrument, has accepted principal regulatory
oversight of the trust.
(e) The form of the trust and any trust amendments also shall
be filed with the insurance commissioner of every state in which
the ceding insurer beneficiaries of the trust are domiciled. + }
The trust instrument must provide that contested claims shall be
valid and enforceable upon the final order of any court of
competent jurisdiction in the United States. The trust must vest
legal title to its assets in { - the - } { + its + } trustees
{ - of the trust for its - } { + for the benefit of the
assuming insurer's + } United States { - policyholders and - }
ceding insurers and their assigns and successors in interest.
{ - The assets of the trust must be authorized as provided by
ORS 733.510 and are subject to valuation requirements of ORS
733.160 and 733.165. - } The trust and the assuming insurer are
subject to examination as determined by the director. The trust
must remain in effect for as long as the assuming insurer has
outstanding obligations due under the reinsurance agreements
subject to the trust.
{ - (e) - } { + (f) + } Not later than March 1 of each
year, the trustees of each trust shall report to the director in
writing { - , stating - } the balance of the trust and listing
the trust's investments at the preceding { - calendar - } year
end, and shall certify the date of termination of the trust, if
so planned, or certify that the trust will not expire prior to
the { - next - } { + following + } December 31.
{ - (6) - } { + (7) + } Credit shall be allowed when the
reinsurance is ceded to an assuming insurer not meeting the
requirements of subsection { - (2), - } (3), (4) { + , + }
{ - or - } (5) { + or (6) + } of this section, but only
{ - with respect - } { + as + } to the insurance of risks
located in jurisdictions in which the reinsurance is required by
applicable law or regulation of that jurisdiction.
{ - (7) - } { + (8) + } If the assuming insurer is not
authorized to transact insurance in this state or accredited as a
reinsurer in this state, the director shall not allow the credit
permitted by subsections { - (4) and - } (5) { + and (6) + }
of this section unless the assuming insurer agrees in the
reinsurance agreement to the provisions stated in this
subsection. This subsection is not intended to conflict with or
override the obligation of the parties to a reinsurance agreement
to arbitrate their disputes, if such an obligation is created in
the agreement. The assuming insurer must agree in the reinsurance
agreement:
(a) That in the event of the failure of the assuming insurer to
perform its obligations under the terms of the reinsurance
agreement, the assuming insurer, at the request of the ceding
insurer, shall submit to the jurisdiction of any court of
competent jurisdiction in any state of the United States, will
comply with all requirements necessary to give the court
jurisdiction and will abide by the final decision of the court or
of any appellate court in the event of an appeal; and
(b) To designate the director or a designated attorney as its
true and lawful attorney upon whom any lawful process in any
action, suit or proceeding instituted by or on behalf of the
ceding company may be served.
{ + (9) If the assuming insurer does not meet the
requirements of subsection (3), (4) or (5) of this section, the
credit permitted by subsection (6) of this section shall not be
allowed unless the assuming insurer agrees in the trust
agreements to the following conditions:
(a) Notwithstanding any other provisions in the trust
instrument, if the trust fund is inadequate because it contains
an amount less than the applicable amount required by subsection
(6)(a), (b) or (c) of this section, or if the grantor of the
trust has been declared insolvent or placed into receivership,
rehabilitation, liquidation or similar proceedings under the laws
of the grantor's state or country of domicile, the trustee shall
comply with an order of the insurance commissioner with
regulatory oversight over the trust or with an order of a court
of competent jurisdiction directing the trustee to transfer to
the insurance commissioner with regulatory oversight all the
assets of the trust fund.
(b) The assets shall be distributed by and claims shall be
filed with and valued by the insurance commissioner with
regulatory oversight in accordance with the laws of the state in
which the trust is domiciled that are applicable to the
liquidation of domestic insurance companies.
(c) If the insurance commissioner with regulatory oversight
determines that the assets of the trust fund or any part thereof
are not necessary to satisfy the claims of the United States
ceding insurers of the grantor of the trust, the assets or part
thereof shall be returned by the insurance commissioner according
to the laws of that state and according to the terms of the trust
agreement not inconsistent with the laws of that state.
(d) The grantor shall waive any right otherwise available to it
under United States law that is inconsistent with this
subsection. + }
SECTION 16. ORS 731.510 is amended to read:
731.510. (1) Subject to the provisions of ORS 731.508 relating
to allowance of credit for reinsurance, the Director of the
Department of Consumer and Business Services shall allow a
reduction from liability for the reinsurance ceded by a domestic
insurer to a reinsurer not meeting the requirements of ORS
731.509 in an amount not exceeding the liabilities carried by the
ceding insurer, as provided in this section. The reduction
{ - must not be greater than - } { + shall be in + } the
amount of funds held by or on behalf of the ceding insurer,
including funds held in trust for the ceding insurer, under a
reinsurance contract with the reinsurer as security for the
payment of obligations thereunder, if the security:
(a) Is held in the United States subject to withdrawal solely
by and under the exclusive control of the ceding insurer; or
(b) In the case of a trust, is held in a qualified United
States financial institution. For purposes of this paragraph, a
qualified United States financial institution is an institution
that:
(A) Is organized, or, in the case of a United States branch or
agency office of a foreign banking organization, is licensed,
under the laws of the United States or any state thereof and has
been granted authority to operate with fiduciary powers; and
(B) Is regulated, supervised and examined by federal or state
authorities having regulatory authority over banks and trust
companies.
(2) The security for purposes of subsection (1) of this section
may be in any of the following forms:
(a) Cash.
(b) Securities listed by the Securities Valuation Office of the
National Association of Insurance Commissioners and qualifying as
allowed assets.
(c) Clean, irrevocable, unconditional letters of credit, issued
or confirmed by a qualified United States { + financial + }
institution, { - as defined in this paragraph, - }
{ + effective + } not later than December 31 of the year for
which filing is being made, and in the possession of { + , or in
trust for, + } the ceding company on or before the filing date of
its annual statement. Letters of credit issued or confirmed by an
institution meeting applicable standards of issuer acceptability
as of the dates of their issuance or confirmation shall continue
to be acceptable as security, notwithstanding the subsequent
failure of the issuing or confirming institution to meet
applicable standards of issuer acceptability, until their
expiration, extension, renewal, modification or amendment,
whichever occurs first. For purposes of this paragraph, a
qualified United States { + financial + } institution is an
institution that:
(A) Is organized or, in the case of a United States office of a
foreign banking organization, is licensed, under the laws of the
United States or any state thereof;
(B) Is regulated, supervised and examined by United States
federal or state authorities having regulatory authority over
banks and trust companies; and
(C) Has been determined by the director to meet such standards
of financial condition and standing as are considered necessary
and appropriate to regulate the quality of financial institutions
whose letters of credit will be acceptable to the director. For
the purpose of making a determination under this subparagraph,
the director shall consider and may accept determinations made by
the Securities Valuation Office of the National Association of
Insurance Commissioners as to whether a financial institution
meets its standards of financial conditions and standing.
(d) Any other form of security acceptable to the director.
SECTION 17. ORS 733.165 is amended to read:
733.165. (1) Securities held by an insurer, other than bonds or
other evidences of debt to which ORS 733.160 applies, must be
valued in the discretion of the Director of the Department of
Consumer and Business Services at their market value, at their
appraised value or at prices determined by the director as
representing their fair market value.
(2) Preferred or guaranteed stocks or shares while paying full
dividends may be carried at a fixed value instead of market
value, at the discretion of the director and in accordance with
any method of valuation approved by the director.
(3) Stock of a subsidiary corporation of an insurer must not be
valued at an amount in excess of the net value thereof as based
upon the assets only of the subsidiary that would be eligible
under ORS { - 733.630 and 733.635 - } { + 733.510 to
733.780 + } for investment of the funds of the insurer directly.
(4) The director may determine the method of calculating values
as provided in this section, but the method or valuation may not
be inconsistent with any applicable method or valuation used by
insurers in general or any such method of valuation then
currently formulated or approved by the National Association of
Insurance Commissioners or its successor organization.
SECTION 18. ORS 750.321 is amended to read:
750.321. (1) Benefit plans issued by a trust must provide for a
charge or deposit payable in cash and, except as provided in this
section, for an assessment against member employers for purposes
of subsection (2) of this section at least equal to one month's
contribution by the employer. The assessment may be prefunded. A
member employer may not be liable { + under this subsection + }
for an amount greater than the charge or deposit required in the
plan.
(2) If at any time the { - minimum reserves - } { + capital
and surplus of the trust + } are less than the requirement of ORS
{ - 750.315 - } { + 750.309 + }, the trust must immediately
collect from member employers upon each plan a sufficient
proportionate part of the amount assessable under subsection (1)
of this section to restore the
{ - reserves. However, - } { + amount of capital and surplus
required. An assessment of an employer under this subsection may
not exceed the amount provided in the plan for an assessment for
purposes of this subsection.
(3) In addition to assessments that may be collected under
subsection (2) of this section, in the event of liquidation of a
multiple employer welfare arrangement trust, the Director of the
Department of Consumer and Business Services, acting in the
capacity of receiver, may assess member employers an amount
necessary to pay outstanding claims and costs necessary to
administer the liquidation proceedings. An assessment of an
employer under this subsection may not exceed the amount of one
month's contribution by the employer.
(4) + } A member employer of { - the - } { + an + }
association or group shall not be liable for any part of
{ - the - } { + an + } assessment { + imposed under
subsection (2) or (3) of this section + } in excess of the amount
demanded within one year after the termination of the member
employer's participation in the plan.
SECTION 19. ORS 731.752 is amended to read:
731.752. (1) A report filed with the Director of the Department
of Consumer and Business Services according to requirements
established by rule for the purpose of determining the amount of
capital or surplus, or any combination thereof, that should be
possessed and maintained by an insurer under ORS 731.554 { + or
by a health care service contractor under ORS 750.045 + }, or
under the laws of another state establishing similar
requirements, shall be confidential and shall not be disclosed
except as considered necessary by the director in administration
of the Insurance Code.
(2) A financial plan of action stating corrective actions to be
taken by an insurer { + or health care service contractor + } in
response to a determination of inadequate capital or surplus, or
any combination thereof, that is filed by the insurer { + or
health care service contractor + } with the director according to
requirements established by rule shall be confidential and shall
not be disclosed except as considered necessary by the director
in administration of the Insurance Code.
(3) The results or report of any examination or analysis of an
insurer { + or health care service contractor + } performed by
the director in connection with a financial plan described in
subsection (2) of this section and any corrective order issued by
the director pursuant to such an examination or analysis shall be
confidential and shall not be disclosed except as considered
necessary by the director in administration of the Insurance
Code.
(4) Documents described in subsections (1) to (3) of this
section are not subject to subpoena and shall not be used in any
action or proceeding except to the extent considered necessary by
the director in the administration of the Insurance Code.
(5) Information contained in documents described in subsections
(1) to (3) of this section that is also contained in financial
statements of insurers { + or health care service
contractors + } filed under ORS 731.574 or in final examination
reports filed under ORS 731.312 is not confidential under this
section.
SECTION 20. ORS 731.754 is amended to read:
731.754. (1) The Director of the Department of Consumer and
Business Services may use the following only for the purpose of
monitoring the solvency of insurers { + and health care service
contractors + } and the need for possible corrective action with
respect to insurers { + and health care service contractors + }:
(a) Reports and financial plans of action that are made
confidential under ORS 731.752; and
(b) Instructions adopted and amended by the National
Association of Insurance Commissioners for use by insurers
{ + and health care service contractors + } in preparing reports
and financial plans of action referred to in paragraph (a) of
this subsection.
(2) The director may not use reports, financial plans of action
and instructions referred to in subsection (1) of this section
for ratemaking, for reviewing rate filings or in a rate
proceeding related thereto, or to calculate or derive any
elements of an appropriate premium level or rate of return for
any line of insurance that an insurer { + , a health care service
contractor + } or an affiliate is authorized to transact. Such
reports and financial plans of action also shall not be
introduced as evidence in a rate proceeding.
(3) This section does not restrict the authority of the
director to use information included in reports, financial plans
or instructions referred to in subsection (1) of this section
that is available from other sources.
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