Chapter 196 Oregon Laws 1999

Session Law

AN ACT

SB 195

Relating to deposits by insurers; amending ORS 731.362, 731.604, 731.624, 731.628, 731.632, 731.636, 731.640, 731.642, 731.648, 731.652, 733.090, 750.305 and 750.309 and section 2, chapter 169, Oregon Laws 1995, and section 1, chapter 336, Oregon Laws 1995.

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

SECTION 1. ORS 731.362 is amended to read:

731.362. (1) A foreign or alien insurer may be authorized to transact insurance in this state when it has complied with the following requirements:

(a) It shall file with the Director of the Department of Consumer and Business Services a certified copy of its charter, articles of incorporation or deed of settlement and a statement of its financial condition and business in all states in such form and detail as the director may require, signed and sworn to by at least two of its executive officers or the United States manager.

(b) It shall satisfy the director that it is fully and legally organized under the laws of its state or government to do the business it proposes to transact.

(d) It shall make such deposits with the [State Treasurer] Department of Consumer and Business Services as are required by the provisions of the Insurance Code.

(2) Upon compliance with the requirements of this section and all other requirements imposed on such insurer by the Insurance Code, the director shall issue to it a certificate of authority.

SECTION 2. ORS 731.604 is amended to read:

731.604. The following deposits of insurers shall be accepted and held by the [State Treasurer] Department of Consumer and Business Services for the purposes for which such deposits are made and are subject to the applicable provisions of the Insurance Code:

(1) Deposits required or permitted under the Insurance Code.

(2) Deposits of domestic insurers made pursuant to the laws of other jurisdictions.

SECTION 3. ORS 731.624 is amended to read:

731.624. Every insurer, before transacting insurance in this state, shall make the following deposits with the [State Treasurer] Department of Consumer and Business Services:

(1) Foreign or alien insurers transacting surety insurance in this state, $250,000.

(2) Foreign or alien insurers transacting title insurance in this state, $100,000.

(3) Foreign or alien insurers transacting home protection insurance in this state, $100,000.

(4) Foreign or alien insurers transacting mortgage guaranty insurance in this state, $500,000.

SECTION 4. ORS 731.628 is amended to read:

731.628. (1) In addition to any other requirement therefor under the Insurance Code, each insurer other than the State Accident Insurance Fund Corporation that issues guaranty contracts to employers under ORS chapter 656 shall deposit with the [State Treasurer] Department of Consumer and Business Services an amount that is the greater of the following amounts:

(a) $100,000.

(b) An amount equal to the sum described in this paragraph less credits for approved reinsurance that the insurer may take under subsection (2) of this section. The sum under this paragraph is the sum of the following, computed as of December 31 next preceding in respect to guaranty contracts written subject to ORS chapter 656:

(A) The aggregate of the present values at four percent interest of the determined and estimated future loss and loss-expense payments upon claims incurred more than three years next preceding the date of computation.

(B) The aggregate of the amounts computed under this subparagraph for each of the three years next preceding the date of computation. The amount for each year shall be 65 percent of the earned premiums for the year less all loss and loss-expense payments made upon claims incurred in the corresponding year, except that the amount for any year shall not be less than the present value at four percent interest of the determined and estimated future loss and loss-expense payments upon claims incurred in that year.

(2) Before an insurer may take a credit for reinsurance under subsection (1)(b) of this section, the reinsurer must deposit with the [State Treasurer] department an amount equal to the credit to be taken.

(3) An insurer may be allowed the credit referred to in subsection (1)(b) of this section only when the reinsurer has deposited with the [State Treasurer] department an amount equal to the credit.

SECTION 5. ORS 731.632 is amended to read:

731.632. Every domestic reciprocal insurer shall deposit with the [State Treasurer] Department of Consumer and Business Services $50,000, except such an insurer which exchanges policies of insurance covering only wet marine hull insurance for persons whose earned income, in whole or in part, is derived from taking and selling food resources living in an ocean, bay or river.

SECTION 6. ORS 731.636 is amended to read:

731.636. (1) Except as provided in subsection (3) of this section, every alien insurer, before transacting insurance in this state as an authorized insurer, shall deposit with the [State Treasurer] Department of Consumer and Business Services the sum of the following amounts:

(a) The amount of its outstanding liabilities arising out of its insurance transactions in the United States; and

(b) Its required capitalization.

(2) ORS 731.640 (1)(d) does not apply with respect to such deposit.

(3) In lieu of such deposit, the insurer may furnish evidence satisfactory to the Director of the Department of Consumer and Business Services that it maintains in the United States, by way of trust deposits with public depositories or with trust institutions acceptable to the director, assets at least equal to the deposit otherwise required by this section.

SECTION 6a. ORS 731.640 is amended to read:

731.640. (1) Deposits which are required or permitted under the Insurance Code shall consist only of the following:

(a) Cash.

(b) Amply secured obligations of the United States, a state or a political subdivision thereof.

(c) Certificates of deposit or other investments described in ORS 733.650 (4). The Director of the Department of Consumer and Business Services may promulgate rules to limit such investments.

(d) A surety bond, approved by the director, executed by an authorized surety insurer that is not under common ownership, management or control with the person making the deposit. This paragraph does not apply to deposits made by surety insurers or to workers' compensation deposits made under ORS 731.628.

(e) Amply secured obligations of a corporation rated by the National Association of Insurance Commissioners as Class 1. This paragraph applies only to that portion of the total deposit that exceeds $100 million.

(2) Deposits of domestic insurers made pursuant to the laws of other jurisdictions shall consist of cash or securities as required or permitted by the laws of such jurisdictions.

SECTION 7. ORS 731.642 is amended to read:

731.642. The [State Treasurer] Director of the Department of Consumer and Business Services in performing duties under ORS 731.604 to 731.652 and after consultation with the State Treasurer, may enter into contracts with banks qualified to act as trust companies and as depositories of state funds to hold and service securities deposited by insurers with the [State Treasurer] Department of Consumer and Business Services. The insurers whose securities are held and serviced by the banks shall pay for the cost of such contracts.

SECTION 8. ORS 731.648 is amended to read:

731.648. (1) Every deposit made in this state by an insurer pursuant to the Insurance Code shall be so held as long as there is outstanding any liability of the insurer as to which the deposit was required, except as follows:

(a) If the deposit was required under ORS 731.854, the deposit shall be held for so long as the basis of such retaliation exists.

(b) If the deposit was required of a reinsurer under ORS 731.628, the deposit shall be held as long as there is outstanding any liability of the reinsurer with respect to which the deposit was made.

(2) No surety insurer shall be permitted to withdraw its deposit for a period of three years after discontinuing business within this state.

(3) The [State Treasurer shall release a deposit upon the written direction of the] Director of the Department of Consumer and Business Services [and return the] shall release a deposit:

(a) To the insurer upon extinguishment by reinsurance or otherwise of all liability of the insurer for the security of which the deposit is held. If extinguishment is by reinsurance, the assuming insurer shall be one authorized to transact such insurance in this state.

(b) To the insurer, while unimpaired, to the extent such deposit is in excess of the amount required.

(c) To the surviving corporation or to such person as it may designate for the purpose, upon effectuation of a merger of the depositing insurer, if the surviving insurer is authorized to transact insurance in this state.

(4) The [State Treasurer] director shall release a deposit by an insurer upon order of a court of competent jurisdiction, to the receiver, conservator, rehabilitator, or liquidator of the insurer, or to any other properly designated official or officials who succeed to the management and control of the insurer's assets pursuant to delinquency proceedings brought against the insurer. The [State Treasurer] director shall release a deposit by a reinsurer under ORS 731.628 upon order of a court of competent jurisdiction, to the receiver, conservator, rehabilitator, or liquidator of the ceding insurer, or to any other properly designated official or officials who succeed to the management and control of the insurer's assets pursuant to delinquency proceedings brought against the ceding insurer.

SECTION 9. ORS 731.652 is amended to read:

731.652. (1) Before [authorizing or permitting the release of] releasing any deposit or portion thereof to the insurer, as provided in ORS 731.648, the Director of the Department of Consumer and Business Services shall require the insurer to file with the director a written statement in such form and with such verification as the director deems advisable setting forth the facts upon which it bases its entitlement to such release.

(2) If release of the deposit is claimed by the insurer upon the ground that all its liabilities, as to which the deposit was held, have been assumed by another insurer authorized to transact insurance in this state, the insurer shall file with the director a copy of the contract or agreement of such reinsurance duly attested under the oath of an officer of each of the insurers that are parties thereto.

(3) If release of the deposit is claimed by a domestic insurer upon the ground that all its liabilities, as to which the deposit was held, have been terminated other than by reinsurance, the director shall make an examination of the affairs of the insurer for determination of the actuality of such termination.

(4) Upon being satisfied by such statement and reinsurance contract, or examination of the insurer if required under subsection (3) of this section, or by such other examination of the affairs of the insurer as the director deems advisable to make, that the insurer is entitled to the release of its deposit or portion thereof as provided in ORS 731.648, the director shall release the deposit or excess portion thereof to the insurer or its authorized representative.

(5) If the director [or the State Treasurer] willfully fails faithfully to keep, deposit, account for or surrender any such assets or securities deposited through the director [or State Treasurer,] in the manner as authorized or required under the Insurance Code, [they] the director shall be liable therefor upon [their] the director's official [bonds] bond, and suit may be brought upon the [bonds] bond by any person injured by such failure. The director [or State Treasurer] shall not, however, have any liability as to any assets or securities of an insurer released by the director [or State Treasurer] in good faith pursuant to the authority vested in the director [or State Treasurer] under the Insurance Code.

SECTION 10. 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:

(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 [State Treasurer] 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 11. Section 1, chapter 336, Oregon Laws 1995, is amended to read:

Sec. 1. (1) As used in this section, "project" means the group of projects that make up the combined sewer overflow program.

(2) Notwithstanding ORS 279.320, 656.126, 737.346 or 746.160, an insurer approved to transact insurance in the State of Oregon, including a guaranty contract insurer as defined in ORS 656.005, may issue with the prior approval of the Director of the Department of Consumer and Business Services a policy of insurance or a guaranty contract covering and insuring the City of Portland, the prime contractor under contract for the construction of the project, any contractors or subcontractors with whom the prime contractor may enter into contracts for the purpose of fulfilling its contractual obligations in construction of the project and any other contractors engaged by the City of Portland to provide architectural or other design services, engineering services, construction management service or other consulting services relating to the design and construction of the projects or any combination thereof.

(3) The director, upon application of any insurer, shall approve the issuance of a policy of insurance or a guaranty contract to any grouping of the persons described in subsection (2) of this section if:

(a) The grouping was formed for the purpose of performing a contract or a series of related contracts for the design and construction of the project;

(b) The combined total estimated cost of the project exceeds $100 million;

(c) The City of Portland can reasonably demonstrate that the formation and operation of the grouping will substantially improve accident prevention and claims handling to the benefit of the City of Portland and the contractors and workers employed in the project;

(d) The established rating and auditing standards required by authorized advisory organizations and rating organizations are adhered to;

(e) Adequate protection is guaranteed by the insurer for the grouping to any other insurance agency or agent that demonstrates that without such protection the insurance agency or agent will suffer losses which will constitute a threat to the continuation of the insurance business of the agency or agent;

(f) The City of Portland can reasonably demonstrate that a substantial savings will result from the formation of the grouping;

(g) The insurer for the grouping will guarantee insurance coverage of the classes of insurance issued to the grouping to any contractor who, because of participation in the group, has been unable to maintain the contractor's normal coverage. The insurer's obligation under this paragraph shall continue 12 months after substantial completion of the contractor's work on the project;

(h) Monoline workers' compensation insurers domiciled in the State of Oregon had the opportunity to propose a policy of insurance or a guaranty contract covering persons referred to in subsection (2) of this section; and

(i) The insurer places with the [State Treasurer] Department of Consumer and Business Services a special deposit of $25,000 per $100 million of construction project value per project phase, or an amount prescribed by rule of the director, whichever is greater.

SECTION 12. Section 2, chapter 169, Oregon Laws 1995, is amended to read:

Sec. 2. (1) As used in this section:

(a) "Project" means a construction project, a plant expansion or improvements within Oregon with an aggregate construction value in excess of $100 million that is to be completed within any five-year period. "Project" does not mean a series of unrelated construction projects artificially aggregated to satisfy the $100 million requirement.

(b) "Project sponsor" means public bodies, utilities, corporations and firms undertaking to construct a project in excess of $100 million and conducting business in the State of Oregon.

(2) Notwithstanding ORS 279.320, 656.126, 737.346 or 746.160, an insurer approved to transact insurance in this state, including the State Accident Insurance Fund Corporation or a guaranty contract insurer as defined in ORS 656.005, may issue with the prior approval of the Director of the Department of Consumer and Business Services a policy of insurance or a guaranty contract covering and insuring the project sponsor, the prime contractor under a contract for the construction of the project, any contractors or subcontractors with whom the prime contractor may enter into contracts for the purpose of fulfilling its contractual obligations in construction of the project and any other contractors engaged by a project sponsor to provide architectural or other design services, engineering services, construction management services, other consulting services relating to the design and construction of the project or any combination thereof.

(a) The grouping was formed for the purpose of performing a contract or a series of related contracts for the design and construction of a project for the project sponsor;

(b) The project sponsor can reasonably demonstrate that the formation and operation of the grouping will substantially improve accident prevention and claims handling to the benefit of the project sponsor and the contractors and workers employed by the project sponsor on construction related projects;

(c) The established rating and auditing standards required by authorized advisory organizations and rating organizations are adhered to;

(d) The insurer for the grouping guarantees adequate protection to any other insurance agency or agent that demonstrates that without such protection the agency or agent will suffer losses that will constitute a threat to the continuation of the business of the agency or agent;

(e) The insurer for the grouping guarantees insurance coverage of the classes of insurance issued to the grouping to any contractor who, because of participation in the group, has been unable to maintain the contractor's normal coverage. The insurer's obligation under this paragraph shall continue until 12 months after substantial completion of the contractor's work;

(f) By permitting this grouping for a project sponsor, greater opportunities will be made available for historically underutilized businesses to bid on the project;

(g) Monoline workers' compensation insurers domiciled in the State of Oregon had the opportunity to propose a policy of insurance or a guaranty contract covering the project sponsor and other persons referred to in subsection (2) of this section;

(h) The project insurers agree to provide not less than 60 days' notice to all insured parties of the cancellation or any material reduction in coverage for the project;

(i) The insurance coverage for the grouping contains a severability of interest clause with respect to liability claims between individuals insured under the group policy and includes contractual liability coverage that applies to the various contracts and subcontracts entered into in connection with the project; and

(j) The insurer places with the [State Treasurer] Department of Consumer and Business Services a special deposit of $25,000 per $100 million of construction project value, or an amount prescribed by rule of the director, whichever is greater.

SECTION 13. ORS 750.305 is amended to read:

750.305. An association or group of employers seeking to provide health benefits through a multiple employer welfare arrangement must apply for a certificate of multiple employer welfare arrangement on a form prescribed by the Director of the Department of Consumer and Business Services. The application must be completed and submitted to the director along with all of the following:

(1) Copies of all articles, bylaws, agreements and other documents or instruments describing the rights and obligations of employers, employees and beneficiaries with respect to the multiple employer welfare arrangement.

(2) A copy of the trust agreement of the multiple employer welfare arrangement.

(3) Current financial statements of the multiple employer welfare arrangement on the basis of statutory accounting principles.

(4) Proof of a bond for the purpose and in the form and amount required by ORS 750.318.

(5) A statement showing in full detail the plan for offering health care benefits through the multiple employer welfare arrangement. The plan must show that the association or group of employers and the trust meet the requirements of ORS 750.307 and 750.309 and must show the procedure established for handling claims for benefits in the event of dissolution of the multiple employer welfare arrangement.

(6) Copies of all contracts or other instruments proposed to be made, offered or sold through the multiple employer welfare arrangement to its member employers, together with a copy of its plan description and the proposed printed matter to be used in the solicitation of member employers.

(7) Evidence that the multiple employer welfare arrangement has applications from five or more employers meeting the requirements of ORS 750.307 and will provide similar benefits for 200 or more participating employees.

(8) Proof of adequate reserves according to the requirements of ORS 750.315.

(9) Proof of deposit with the [State Treasurer] Department of Consumer and Business Services of the initial amount required under ORS 750.309 (4) as a guarantee of the due execution of the trust obligation.

SECTION 14. ORS 750.309 is amended to read:

750.309. The following requirements apply to the trust carrying out a multiple employer welfare arrangement:

(1) The trust must hold and maintain adequate facilities for purposes of the multiple employer welfare arrangement and either must have sufficient personnel to service the employee benefit plan or must contract with a third party administrator licensed under ORS chapter 744 as a third party administrator to provide such services. For purposes of satisfying the requirements of this subsection, the trust may use the premises, facilities and personnel of the association or group of employers and pay reasonable compensation to the association or group for such use.

(2) The trust must hold and maintain an excess loss insurance policy issued to the board of trustees in the name of the multiple employer welfare arrangement by an insurer authorized to transact casualty or health insurance in Oregon. Except as provided in this subsection, the policy must insure the multiple employer welfare arrangement against its liabilities for health benefits with regard to any one participant in excess of 10 percent of the capital and surplus of the trust. A trust may demonstrate to the Director of the Department of Consumer and Business Services that the trust is capable of supporting an exposure exceeding 10 percent of the capital and surplus of the trust. The trust may make such a demonstration only by means of a certification by a qualified actuary that the capital and surplus of the trust is sufficient to support the increased exposure. In any event, such a trust shall not have any exposure exceeding 15 percent of the capital and surplus of the trust. For purposes of this subsection, "participant" refers individually to each person benefited as a separate subject under the plan operated by the multiple employer welfare arrangement. The following also apply to a policy required under this subsection:

(a) The coverage must be evidenced by a binder or policy.

(b) The excess loss insurance policy must contain a provision that it may not be terminated for any reason by any person unless the Director of the Department of Consumer and Business Services receives a written notice of termination from the insurer at least 30 days before the effective date of the termination.

(3) The trust must possess and thereafter maintain capital or surplus, or any combination thereof, of not less than $250,000 or an amount equal to 35 percent of incurred claims for the preceding 12-month period by the trust, whichever is greater. However, the required amount under this subsection may not be more than $500,000.

(4) As a guarantee of the due execution of the trust obligation under the benefit plan or plans to be entered into by the trust in accordance with ORS 750.301 to 750.341, the trust must make and maintain a deposit with the [State Treasurer] Department of Consumer and Business Services as provided in this subsection. The deposit required under this subsection is in addition to the capital and surplus or other amount required to be possessed and maintained by the trust under subsection (3) of this section and may not be included in or counted toward the required capital and surplus or other amount. The following provisions apply to the deposit:

(a) As a condition of obtaining a certificate of multiple employer welfare arrangement, a trust shall make an initial deposit in an amount that is the greater of $50,000 or the amount of the deposit required under paragraph (b) of this subsection.

(b) The amount of the deposit to be maintained under this subsection shall be the lesser of $250,000 or a current required amount calculated by determining the average monthly amount of claims paid by the trust during the preceding 12-month period and multiplying the average monthly amount by three. The current required amount of the deposit shall be calculated as of March 31, June 30, September 30 and December 31 of each calendar year.

(5) In lieu of the deposit required by subsection (4) of this section, a trust may file and maintain a surety bond or such other bond or cash or securities in the sum of $250,000 as are authorized by the Insurance Code.

(6) A trust carrying out a multiple employer welfare arrangement that is established after January 1, 1993, shall maintain the deposit required under subsection (4) of this section during the first four calendar quarters described in subsection (4)(b) of this section following the issuance of its certificate of multiple employer welfare arrangement as provided in this subsection. At the beginning of the second, third and fourth calendar quarters after such a trust receives its certificate of multiple employer welfare arrangement, the current required amount of the deposit to be maintained by the trust shall be calculated by determining the average monthly amount of claims paid during the preceding quarter. Beginning with the fifth calendar quarter following the issuance of its certificate of multiple employer welfare arrangement, the trust shall maintain the deposit as provided in subsection (4) of this section.

Approved by the Governor May 27, 1999

Filed in the office of Secretary of State May 27, 1999

Effective date October 23, 1999

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