California’s Senate Insurance Committee recently approved in a unanimous vote SB 1216 (the “Bill”). The Bill, which is generally based on the NAIC Credit for Reinsurance Model Act, would, among other things:
- authorize the commissioner to designate an insurer as a professional reinsurer;
- require a ceding insurer to take steps to manage its reinsurance recoverables proportionate to its own book of business and to diversify its reinsurance program and impose certain notification requirements;
- require that a reinsurer demonstrate, to the satisfaction of the commissioner, it has adequate financial capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from domestic insurers, and would delete the provision authorizing a reinsurer whose accreditation has been approved to maintain a surplus of less than $20,000,000, provided, however, that a reinsurer who maintains a surplus of not less than $20,000,000 and whose accreditation has not been denied by the commissioner within the last 90 days will be automatically deemed to meet the satisfaction of the commissioner;
- enact provisions governing the certification and rating of assuming insurers by the commissioner and specify additional circumstances under which credit will be allowed to a domestic insurer when the reinsurance is ceded to an assuming insurer that has been certified; and
- require that credit for reinsurance not be denied a foreign ceding insurer to the extent that credit is recognized by the ceding insurer’s domestic state regulator, provided that the domestic state is accredited by the NAIC, or the domestic state regulator has financial solvency requirements similar to the requirements necessary for NAIC accreditation.
The Bill has been referred to the Senate Committee on Appropriates, where it awaits further action.
