Chapter 185 Oregon Laws 2005

AN ACT

HB 2160

Relating to regulation of insurance; creating new provisions; and amending ORS 317.650, 731.272, 731.442, 732.430, 735.415, 735.425, 735.430, 737.035, 742.001, 742.041, 742.710, 743.015 and 746.360.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 731.442 is amended to read:

731.442. [(1) Except as provided in subsection (2) of this section, no] An insurer may not transact a life insurance business upon [the] a mutual assessment plan within this state.

[(2) Insurers transacting a credit life insurance business, as defined in ORS 743.371, before September 2, 1963, may continue such business if such insurers:]

[(a) Adopt and use only such rates and plans as are based upon the Commissioner’s 1941 Standard Ordinary Table of Mortality with interest at three percent per annum or a less rate and have the reserve required by such mortality table invested in assets of an approved character; and]

[(b) Maintain admitted assets in excess of actual liabilities by an amount equal to one percent of all insurance such insurer has in force or $5,000, whichever is the greater. Such assets shall consist of cash, money on deposit in banks or investments authorized by ORS 733.510 to 733.780 or the laws of the state in which the insurer is domiciled.]

SECTION 2. ORS 742.041 is amended to read:

742.041. (1) Except as provided in this section, when more than one class of insurance as defined in ORS 731.150 to 731.194 is effected by an insurer each class shall be written in a separate and distinct policy. Any such policy may be canceled, surrendered or otherwise terminated without affecting other premiums paid or policies held by the same insured.

(2) Except as provided in this section, the same policy shall not include insurance coverages as to which the liability of the insurer for unearned premiums or the reserve for unpaid, deferred or undetermined loss claims is estimated in a different manner.

(3) Insurance in one policy may be effected upon automobiles and vehicles, and the accessories and other property transported upon and used in connection therewith, against loss or damage by fire, collision and explosion, and against loss by legal liability for damage to persons or property, or both, resulting from the maintenance, use or operation of such automobiles or vehicles, and against loss by burglary, embezzlement or theft, or any one or more of them. Premiums and losses for such insurance are to be reported to the Director of the Department of Consumer and Business Services under the title “automobile insurance.” For this purpose an insurer need not use the standard fire insurance policy required by ORS 742.202.

(4) Insurance in one policy may be effected against loss or damage of property and against personal injury and death, and liability therefor, from explosion of steam boilers, tanks and engines, pipes and machinery connected therewith, and breakage of flywheels and machinery. Premiums and losses for such insurance are to be reported to the director under the title “steam boiler insurance.”

(5) Insurance under the classes of life and health insurance may be effected in one policy.

(6) Insurance in one policy effected against any physical loss or damage occurring to properties may include coverage as to other perils, either on an unspecified basis as to coverage or for a single premium.

(7) Insurance in one policy effected against loss or destruction of baggage while traveling which is written on a single premium nonrenewable basis may include travel ticket health insurance benefits.

(8) Insurance under more than one class of insurance may be effected in one policy if the director finds that the issuance of the policy is in the best interest of the public.

SECTION 3. ORS 743.015 is amended to read:

743.015. (1) All credit life and credit health insurance policies subject to ORS 743.371 to 743.380, and all certificates of insurance, notices of proposed insurance, applications for insurance, indorsements and riders used in connection with such kinds of policies, delivered or issued for delivery in this state and the schedules of premium rates pertaining thereto shall be filed with the Director of the Department of Consumer and Business Services. Such forms [shall be] are subject to approval, disapproval or withdrawal of approval by the director as provided in ORS 742.003, 742.005 and 742.007. [Policies issued pursuant to ORS 731.442 shall be subject to the same regulation as other credit insurance policies.]

(2) An insurer may revise [such] the schedules of premium rates from time to time[,] and shall file [such] the revised schedules with the director. [No] An insurer [shall] may not issue any [such] credit life or credit health insurance policy for which the premium rate exceeds that determined by the schedules of [such] the insurer as then on file with the director.

(3) If [such] a group policy of credit life or credit health insurance has been or is delivered in another state, the insurer shall [be required to] file only the group certificate, the individual application and the notice of proposed insurance delivered or issued for delivery in this state as specified in ORS 743.377 (2) and (4). [, and such forms shall be approved by] The director shall approve the group certificate, the individual application and the notice of proposed insurance if [they] the forms conform with the requirements specified in [such subsections] ORS 743.377 (2) and (4) and [if] the schedules of premium rates applicable to the insurance evidenced by [such] the certificate or notice are not in excess of the insurer’s schedules of premium rates filed with the director.

SECTION 4. Section 5 of this 2005 Act is added to and made a part of ORS 743.255 to 743.273.

SECTION 5. (1) An insurer may advance a policy loan equal to or less than the loan value of an annuity policy or a pure endowment policy if:

(a) The policy premium is not in default beyond the grace period for payment;

(b) The insured has properly assigned or pledged the policy on the sole security thereof; and

(c) The interest rate provision complies with ORS 743.187 and does not exceed the maximum interest rate permitted by the policy loan provision.

(2) An insurer may establish a minimum loan amount that may not exceed $1,000.

(3) Except as provided in subsection (4) of this section, the loan value of the policy shall be equal to the cash surrender value of the policy, less any existing indebtedness and interest due that is not already deducted in determining the cash surrender value, plus any interest then accrued but not credited.

(4) Subsection (3) of this section does not apply to a policy for which the loan value is established by federal law. When the loan value is established by federal law, the policy shall indicate the loan value as a dollar amount, a percentage of the cash surrender value or a combination of both.

(5) 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. However, if there is any remaining cash surrender value under the policy after deducting the total indebtedness on the policy, an insurer may not terminate the policy.

(6) A insurer may provide for automatic premium loans in an annuity policy or a pure endowment policy.

(7) An annuity policy or a pure endowment policy may reserve to the insurer the right to defer the granting of a loan, other than for payment of any premium to the insurer, for six months after application for the loan if the insurer makes a written request to and receives written approval from the chief insurance regulator of the state of domicile of the insurer prior to exercising a deferral.

SECTION 6. ORS 746.360 is amended to read:

746.360. ORS 746.320 to 746.360 do not apply to an action against an unauthorized insurer arising out of any policy of:

(1) Reinsurance or wet marine and transportation insurance;

(2) Insurance effected in compliance with ORS 735.400 to 735.495 [744.305 to 744.405 (1985 Replacement Part)];

(3) Insurance against legal liability arising out of ownership, operation or maintenance of any property having a permanent situs outside the state; or

(4) Insurance against loss of or damage to any property having a permanent situs outside this state, where such policy contains a provision designating the Director of the Department of Consumer and Business Services or a bona fide resident of this state as the insurer’s lawful attorney upon whom all process may be served in any action begun by or on behalf of an insured or beneficiary and arising out of policies of insurance between the insurer and persons residing or authorized to do business in this state.

SECTION 7. ORS 317.650 is amended to read:

317.650. (1) ORS 317.356, relating to depreciation and basis, shall be applicable to every insurer.

(2) Notwithstanding ORS 314.835 or 314.840 or any other law concerning confidentiality of tax returns, the Department of Consumer and Business Services and the Department of Revenue may disclose to each other returns and all other information necessary to carry out [the provisions of section 2, chapter 786, Oregon Laws 1995,] ORS 731.854 and 731.859 and otherwise to administer the corporate excise tax imposed by this chapter on insurers.

(3) Notwithstanding ORS 314.085 or other law, for purposes of this chapter, [any foreign or alien insurer, or any insurer described in ORS 731.816 (1993 Edition), must file a return on a calendar year basis] each of the following insurers shall file a return on a calendar year basis:

(a) A foreign or alien insurer; or

(b) A domestic insurer organized after January 1, 1971, the ownership or control of which is exercised, directly or indirectly, by a foreign insurer or other foreign corporation owning or controlling directly or indirectly, a foreign insurer.

SECTION 8. ORS 731.272 is amended to read:

731.272. (1) The Director of the Department of Consumer and Business Services shall prepare annually, as soon after March 1 as is consistent with full and accurate preparation, a report of the official transactions of the director under the Insurance Code [containing:]. The report shall include:

[(1)] (a) In condensed form statements made to the director by every insurer authorized to do business in this state.

[(2)] (b) A statement of all insurers authorized to do business in this state [on December 31 next preceding] as of the date of the report.

[(3)] (c) A list of insurers whose business in this state was terminated and the reason for [such] the termination[; and if such]. If the termination was a result of liquidation or delinquency proceedings brought against the insurer in this or any other state, the report shall include the amount of the insurer’s assets and liabilities so far as [the same] those amounts are known to the director.

[(4)] (d) A statement of the operating expenses of the Department of Consumer and Business Services under the Insurance Code, including salaries, transportation, communication, printing, office supplies, fixed charges and miscellaneous expenses.

[(5)] (e) A detailed statement of the moneys, fees and taxes received by the department under the Insurance Code and from what source.

[(6)] (f) [Such] Any other pertinent information and matters as the director considers to be in the public interest.

(2) The director shall give notice of the publication of the report to:

(a) The office of the Speaker of the House of Representatives;

(b) The office of the President of the Senate; and

(c) The chair or co chairs of the Joint Legislative Committee on Ways and Means if the Legislative Assembly is in session or of the Emergency Board if during the interim.

SECTION 9. ORS 732.430 is amended to read:

732.430. Every person who is directly or indirectly the beneficial owner of more than 10 percent of any class of any equity security of a domestic stock insurer, or who is a director or an officer of [such] the insurer, shall file with the Director of the Department of Consumer and Business Services [on or before January 31, 1966, or] within 10 days after the person becomes [such] a beneficial owner, director or officer, a statement, [in such form as the director may prescribe] on a form prescribed by the director, of the amount of all equity securities of [such] the insurer of which the person is the beneficial owner[, and within 10 days after the close of each calendar month thereafter, if there has been a change in such ownership during such month,]. If there is a change in the ownership by a person to whom this section applies, the person shall file [in the office of] with the director a statement, [in such form as the director may prescribe] on a form prescribed by the director, indicating the person’s ownership [at the close of the calendar month and such] and the changes in the person’s ownership [as have occurred during such calendar month]. The person shall file the statement of change in ownership before the end of the second business day following the day on which the transaction was executed. If it is not feasible for the person to file the statement by the end of the second business day, the person shall file the statement according to rules adopted by the director.

SECTION 10. ORS 737.035 is amended to read:

737.035. This chapter applies to all forms of insurance on risks or operations in this state, except:

(1) Reinsurance, other than joint reinsurance to the extent stated in ORS 737.390;

(2) Insurance against loss of, or damage to, aircraft, including accessories and equipment, or against liability arising out of ownership, maintenance or use of aircraft;

(3) Wet marine and transportation insurance;

(4) Life insurance; [or]

(5) Health insurance[.]; or

(6) Surplus lines insurance.

SECTION 11. ORS 735.415 is amended to read:

735.415. (1) A surplus lines licensee may not place any coverage with a nonadmitted insurer unless at the time of placement the nonadmitted insurer has done all of the following:

(a) Established satisfactory evidence of good repute and financial integrity.

(b) Qualified under one of the following subparagraphs:

(A) Has capital and surplus or its equivalent under the laws of its domiciliary jurisdiction that equals either the minimum capital and surplus requirements under the laws of this state or $5 million, except that the requirements of this paragraph may be satisfied by an insurer possessing less than $5 million capital and surplus upon an affirmative finding of acceptability by the Director of the Department of Consumer and Business Services. The finding shall be based upon such factors as quality of management, capital and surplus of any parent company, company underwriting profit and investment income trends and company record and reputation within the industry. In no event shall the director make an affirmative finding of acceptability when the surplus lines insurer’s capital and surplus is less than $3 million.

(B) Except as otherwise provided in subparagraph (C) of this paragraph, in the case of an alien insurer, [qualifies under this subsection if it] maintains in the United States an irrevocable trust fund in either a national bank or a member of the Federal Reserve System, in an amount not less than $1.5 million for the protection of all its policyholders in the United States and such trust fund consists of cash, securities, irrevocable letters of credit, or of investments of substantially the same character and quality as those which are eligible investments for the capital and statutory reserves of admitted insurers authorized to write like kinds of insurance in this state. Such trust fund, which shall be included in any calculation of capital and surplus or its equivalent, shall have an expiration date which at no time shall be less than five years.

(C) In the case of a group of insurers that includes incorporated and individual unincorporated underwriters, maintains a trust fund of not less than $50 million as security to the full amount thereof for all policyholders and creditors in the United States of each member of the group, and such trust shall likewise comply with the terms and conditions established in subparagraph (B) of this paragraph for alien insurers, except that 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.

(D) In the case of an insurance exchange created by the laws of individual states, maintains capital and surplus, or the substantial equivalent thereof, of not less than $15 million in the aggregate. For insurance exchanges that maintain funds for the protection of all insurance exchange policyholders, each individual syndicate shall maintain minimum capital and surplus, or the substantial equivalent thereof, of not less than $1.5 million. In the event the insurance exchange does not maintain funds for the protection of all insurance exchange policyholders, each individual syndicate shall meet the minimum capital and surplus requirements of subparagraph (A) of this paragraph.

(E) Is on the most current list of alien insurers approved by the National Association of Insurance Commissioners and meets additional requirements regarding the use of the list established by rule of the director.

(c) Unless qualified under paragraph (b)(E) of this subsection, provided to the director no more than six months after the close of the period reported upon a certified copy of its current annual statement that is:

(A) Filed with and approved by the regulatory authority in the domicile of the nonadmitted insurer;

(B) Certified by an accounting or auditing firm licensed in the jurisdiction of the insurer’s domicile; or

(C) In the case of an insurance exchange, an aggregate combined statement of all underwriting syndicates operating during the period reported.

(2) When a nonresident surplus lines licensee or nonresident surplus lines insurance producer who is not licensed to transact surplus lines insurance in this state places surplus lines insurance outside this state that covers a risk with exposures both in this state and outside this state, the licensee or insurance producer is not subject to the requirements of subsection (1) of this section if the nonadmitted insurer with which the coverage is placed:

(a) Meets the requirements for nonadmitted placement of insurance in the state in which the insurance is placed; or

(b) Is an authorized or admitted insurer in the state in which the insurance is placed.

SECTION 12. ORS 735.425 is amended to read:

735.425. (1) Within 90 days after the placing of any surplus lines insurance in this state, each surplus lines licensee shall file with the Director of the Department of Consumer and Business Services:

(a) [An affidavit] A statement signed by the licensee regarding the insurance, which shall be kept confidential as provided in ORS 705.137, including the following:

(A) The name and address of the insured;

(B) The identity of the insurer or insurers;

(D) The amount of premium charged for the insurance; and

(E) Such other pertinent information as the director may reasonably require.

(b) A statement on a standardized form furnished by the director, as to the diligent efforts by the producing insurance producer to place the coverage with admitted insurers and the results thereof. The statement shall be signed by the producing insurance producer and shall affirm that the insured was expressly advised prior to placement of the insurance that:

(A) The surplus lines insurer with whom the insurance was to be placed is not licensed in this state and is not subject to its supervision; and

(B) In the event of the insolvency of the surplus lines insurer, losses will not be paid by the state insurance guaranty fund.

(2) The director may direct that filings required under subsection (1) of this section be made to the Surplus [Lines] LineAssociation of Oregon. The director may also require that such filings be made electronically but may exempt a licensee from the requirement for good cause shown.

(3) A nonresident surplus lines licensee or nonresident producing insurance producer not licensed to transact surplus lines insurance in this state who places a surplus lines policy on a risk with exposures located both in this state and outside this state shall satisfy filing requirements established by the director by rule. The director shall ensure that the rules facilitate interstate regulation of surplus lines insurance transactions.

(4) Facsimile signatures and electronic signatures subject to ORS 84.001 to 84.061 are acceptable and have the same force as original signatures.

SECTION 13. ORS 735.430 is amended to read:

735.430. (1) The Surplus [Lines] Line Association of Oregon shall be the advisory organization of surplus lines licensees to:

(a) Facilitate and encourage compliance by [its members] resident and nonresident surplus lines licensees with the laws of this state and the rules of the Director of the Department of Consumer and Business Services relative to surplus lines insurance;

(b) Provide means for the examination, which shall remain confidential as provided in ORS 705.137, of all surplus lines coverage written by [its members] resident and nonresident surplus lines licensees to determine whether [such] the coverages comply with [such laws] the Oregon Surplus Lines Law;

(d) Receive and disseminate to [its members] resident and nonresident surplus lines licensees information relative to surplus lines coverages; and

(e) Receive and collect on behalf of the state and remit to the state premium receipts tax for surplus lines insurance.

(2) The Surplus [Lines] Line Association of Oregon shall file with the director:

(a) A copy of its constitution, articles of agreement or association or certificate of incorporation;

(b) A copy of its bylaws and rules governing its activities;

(d) The name and address of a resident of this state upon whom notices or orders of the director or processes issued at the direction of the director may be served;

(e) An agreement that the director may examine the Surplus [Lines] Line Association of Oregon in accordance with the provisions of this section; and

(f) A schedule of [membership] fees and charges.

(3) The director may make or cause to be made an examination of the surplus lines advisory organization. The reasonable cost of any such examination shall be paid by the surplus lines advisory organization upon presentation to it by the director of a detailed account of each cost. The officers, managers, agents and employees of the surplus lines advisory organization may be examined at any time, under oath, and shall exhibit all books, records, accounts, documents or agreements governing its method of operation. The director shall furnish two copies of the examination report to the surplus lines advisory organization examined and shall notify such organization that it may, within 20 days thereof, request a hearing on the report or on any facts or recommendations therein. If the director finds the surplus lines advisory organization or any member thereof to be in violation of ORS 735.400 to 735.495, the director may issue an order requiring the discontinuance of such violation.

(4) The Surplus Line Association of Oregon may charge resident and nonresident surplus lines licensees and nonresident producing insurance producers a fee for reviewing surplus lines policies and for collecting, on behalf of the state, taxes imposed under ORS 735.470. The association shall adopt bylaws implementing this subsection.

SECTION 14. ORS 742.001 is amended to read:

742.001. This chapter and ORS chapter 743 apply [as] to all insurance policies delivered or issued for delivery in this state [other than] except:

(1) Reinsurance [and].

(2) Wet marine and transportation insurance policies.

(3) Surplus lines insurance policies.

SECTION 15. ORS 742.710 is amended to read:

742.710. (1) ORS 742.700 to 742.708 do not apply to:

(a) Any commercial liability insurance policy that has not been previously renewed if the policy has been in effect less than 60 days at the time notice of cancellation is mailed or otherwise delivered.

(b) Any policy subject to the provisions of ORS 742.560 to 742.572.

(d) Any assigned risk program.

[(e) Any policy issued by a surplus lines insurer.]

[(f)] (e) Any excess liability insurance policy, including any commercial umbrella policy and any excess umbrella policy.

(2) The Director of the Department of Consumer and Business Services may suspend, in whole or in part, the applicability of ORS 742.700 to 742.708 to any insurer if, in the director’s discretion, its application will endanger the ability of the insurer to fulfill its contractual ligations.

SECTION 16. Section 17 of this 2005 Act is added to and made a part of ORS 735.400 to 735.495.

SECTION 17. ORS 731.324, 731.328, 731.512 and 731.624 do not apply to surplus lines insurers.

Approved by the Governor June 8, 2005

Filed in the office of Secretary of State June 9, 2005

Effective date January 1, 2006

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