Bill Text: MO HB525 | 2011 | Regular Session | Engrossed
Bill Title: Establishes requirements regarding certain contracts reinsuring life or health insurance policies or annuities which are covered under the Insurers Supervision, Rehabilitation and Liquidation Act
Spectrum: Bipartisan Bill
Status: (Engrossed - Dead) 2011-05-10 - Placed on Informal Calendar [HB525 Detail]
Download: Missouri-2011-HB525-Engrossed.html
FIRST REGULAR SESSION
[PERFECTED]
96TH GENERAL ASSEMBLY
INTRODUCED BY REPRESENTATIVE MOLENDORP.
1509L.01P D. ADAM CRUMBLISS, Chief Clerk
AN ACT
To amend chapter 375, RSMo, by adding thereto one new section relating to life and health reinsurance contracts.
Be it enacted by the General Assembly of the state of Missouri, as follows:
Section A. Chapter 375, RSMo, is amended by adding thereto one new section, to be known as section 375.1183, to read as follows:
375.1183. 1. Contracts reinsuring insurance policies or annuities referred to in section 375.1178 and issued by a ceding insurer that has been placed in conservation or rehabilitation proceedings under sections 375.1150 to 375.1246 shall be continued or terminated under the terms or conditions of each contract and the provisions of this section.
2. Contracts reinsuring insurance policies or annuities referred to in section 375.1178 and issued by a ceding insurer that has been placed into liquidation under sections 375.1150 to 375.1246 shall be continued, subject to the provisions of this section, unless:
(1) The contracts were terminated under their terms prior to the date of the order of liquidation, hereinafter "the coverage date"; or
(2) The contracts were terminated under the order of liquidation, in which case the provisions of subsection 9 of this section shall apply.
3. (1) At any time within one hundred eighty days of the coverage date, a guaranty association covering insurance policies or annuities referred to in section 375.1178, in whole or in part, may elect to assume the rights and obligations of the ceding insurer that relate to the policies or annuities covered, in whole or in part, by the guaranty association, in each case under any one or more reinsurance contracts between the insolvent insurer and its reinsurers selected by the guaranty association. Any such assumption shall be effective as of the coverage date. The election shall be effected by the applicable guaranty association or foreign guaranty association sending written notice, return receipt requested, to the affected reinsurers.
(2) To facilitate the earliest practicable decision about whether to assume any of the contracts of reinsurance, and in order to protect the financial position of the estate, the receiver and each reinsurer of the ceding insurer shall make available upon request to affected guaranty associations or to foreign guaranty associations as soon as possible after commencement of formal delinquency proceedings:
(a) Copies of in-force contracts of reinsurance and all related files and records relevant to the determination of whether such contracts should be assumed; and
(b) Notices of any defaults under the reinsurance contracts or any known event or condition which with the passage of time could become a default under the reinsurance contracts.
(3) Paragraphs (a) to (d) of this subdivision shall apply to reinsurance contracts so assumed by a guaranty association:
(a) The guaranty association shall be responsible for all unpaid premiums due under the reinsurance contracts, for periods both before and after the coverage date, and shall be responsible for the performance of all other obligations to be performed after the coverage date, in each case that relates to insurance policies or annuities referred to in section 375.1178 covered, in whole or in part, by the guaranty associations. The guaranty association may charge policies of insurance or annuities covered in part by the guaranty association, through reasonable allocation methods, the costs for reinsurance in excess of the obligations of the guaranty association and shall provide notice and an accounting of such charges to the liquidator;
(b) The guaranty association shall be entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods on or after the coverage date and that relate to insurance policies or annuities referred to in section 375.1178 covered, in whole or in part, by the association; provided that, upon receipt of the amounts, the guaranty association shall be obliged to pay to the beneficiary under the insurance policy or annuity on account of which the amounts were paid a portion of the amount equal to the lesser of:
a. The amount received by the guaranty association; and
b. The excess of the amount received by the guaranty association over the amount equal to the benefits paid by the guaranty association on account of the policy or annuity less the retention of the insurer applicable to the loss or event;
(c) Within thirty days following the guaranty association's election (the "election date"), the guaranty association and each reinsurer under reinsurance contracts assumed by the guaranty association shall calculate the net balance due to or from the guaranty association under each reinsurance contract as of the election date with respect to policies or annuities covered, in whole or in part, by the guaranty association, which calculation shall give full credit to all items paid by either the insurer or its receiver or the reinsurer prior to the election date. The reinsurer shall pay the receiver any amounts due for losses or events prior to the coverage date, subject to any setoff for premiums unpaid for periods prior to the date, and the guaranty association or reinsurer shall pay any remaining balance due the other, in each case within five days of the completion of the aforementioned calculation. Any disputes over the amounts due to either the guaranty association or the reinsurer shall be resolved by arbitration under the terms of affected reinsurance contracts or, if the contract contains no arbitration clause, under the provisions of subdivision (4) of subsection 9 of this section. If the receiver has received any amounts due the guaranty association under paragraph (b) of this subdivision, the receiver shall remit the same to the guaranty association as promptly as practicable;
(d) If the guaranty association or receiver, on the guaranty association's behalf, within sixty days of the election date, pays the unpaid premiums due for periods both before and after the election date that relate to insurance policies or annuities referred to in section 375.1178 covered, in whole or in part, by the guaranty association, the reinsurer shall not be entitled to terminate the reinsurance contracts for failure to pay premiums, insofar as the reinsurance contracts relate to insurance policies or annuities referred to in section 375.1178 covered, in whole or in part, by the guaranty association, and shall not be entitled to set off any unpaid amounts due under other contracts, or unpaid amounts due from parties other than the guaranty association, against amounts due the guaranty association.
4. If a receiver continues insurance policies or annuities referred to in section 375.1178 in force following an order of liquidation, and the policies of insurance are not covered in whole or in part by one or more guaranty associations, the receiver may, within one hundred eighty days of the coverage date, elect to assume the rights and obligations of the ceding insurer under any one or more of the reinsurance contracts that relate to the policies or annuities, provided the contracts have not been terminated as set forth in subsection 2 of this section. The election shall be effected by sending written notice, return receipt requested, to the affected reinsurers. In such event, payment of premiums on the reinsurance contracts for the policies and annuities, for periods both before and after the coverage date, shall be chargeable against the estate as a class 1 administrative expense. Amounts paid by the reinsurer on account of losses on the policies and annuities shall be to the estate of the insolvent insurer.
5. During the period from the coverage date until the election date:
(1) (a) Neither the guaranty association nor the reinsurer shall have any rights or obligations under reinsurance contracts that the guaranty association has the right to assume under subsection 3 of this section, whether for periods prior to or after the coverage date;
(b) Neither the receiver nor the reinsurer shall have any rights or obligations under reinsurance contracts that the receiver has the right to assume under subsection 4 of this section with respect to the period after the coverage date, but their respective rights and obligations for the period prior to the coverage date shall remain unchanged; and
(c) The reinsurer, the receiver, and the guaranty associations shall, to the extent practicable, provide each other data and records reasonably requested; and
(2) Provided that once the guaranty association or the receiver, as the case may be, has elected or declined to elect to assume a reinsurance contract, the parties' rights and obligations shall be governed by subsection 3, 4, or 9 of this section, as applicable.
6. (1) If a guaranty association does not elect to assume a reinsurance contract by the election date under subsection 3 of this section, the guaranty association shall have no rights or obligations, in each case for periods both before and after the coverage date, with respect to the reinsurance contract.
(2) If a receiver does not elect to assume a reinsurance contract by the election date under subsection 4 of this section, the receiver and the reinsurer shall retain their respective rights and obligations with respect to the reinsurance contract for the period before the coverage date, but shall have no rights or obligations to each other for the period after the coverage date, except as provided in subsection 9 of this section.
(3) Where a guaranty association or the receiver, as the case may be, does not elect to assume a reinsurance contract covering insurance policies or annuities referred to in section 375.1178 by the election date, the reinsurance contract shall be terminated retroactively effective on the coverage date and subsection 9 of this section shall apply.
7. When insurance policies or annuities referred to in section 375.1178, or guaranty association obligations with respect thereto, are transferred to an assuming insurer, reinsurance on the policies or annuities may be transferred by the guaranty association, in the case of contracts assumed under subsection 3 of this section, or the receiver, in the case of contracts assumed under subsection 4 of this section, as the case may be, subject to the following:
(1) Unless the reinsurer and the assuming insurer agree otherwise, the reinsurance contract transferred shall not cover any new policies of insurance or annuities in addition to those transferred;
(2) The obligations described in subsections 3 and 4 of this section shall no longer apply with respect to matters arising after the effective date of the transfer; and
(3) Notice shall be given in writing, return receipt requested, by the transferring party to the affected reinsurer not less than thirty days prior to the effective date of the transfer.
8. The provisions of this section shall, to the extent provided in sections 375.1150 to 375.1246, supersede the provisions of any law or any affected reinsurance contract that provides for or requires any payment of reinsurance proceeds, on account of losses or events that occur in periods after the coverage date, to the receiver of the insolvent insurer or any other person. The receiver shall remain entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods prior to the coverage date, subject to the provisions of sections 375.1150 to 375.1246 including applicable setoff provisions.
9. When a contract reinsuring insurance policies or annuities referred to in section 375.1178 is terminated under sections 375.1150 to 375.1246, the following procedures set forth in this subsection shall apply:
(1) The reinsurer and the receiver shall, upon written notice to the other party to the reinsurance contract no later than thirty days after the receipt by the reinsurer of notice of termination, commence a mandatory negotiation and arbitration procedure in accordance with this subsection;
(2) Each party shall appoint an actuary to determine an estimated sum due as a result of the termination of the reinsurance contract calculated in a way expected to make the parties economically indifferent as to whether the reinsurance contract continues or terminates, giving due regard to the economic effects of the insolvency. The sum shall take into account the present value of future cash flows expected under the reinsurance contract and be based on a gross premium valuation of net liability using current assumptions that reflect post-insolvency experience expectations, with no additional margins, net of any amounts payable and receivable, with a market value adjustment to reflect premature sale of assets to fund the settlement;
(3) Within ninety days of the written request under subdivision (1) of this subsection, each party shall provide the other party with its estimate of the sum due as a result of the termination of the reinsurance contract, together with all relevant documents and other information supporting the estimate. The parties shall make a good faith effort to reach agreement on the sum due;
(4) If the parties are unable to reach agreement within ninety days following the submission of materials required in subdivision (3) of this subsection, either party may initiate arbitration proceedings as provided in the reinsurance contract. In the event that the reinsurance contract does not contain an arbitration clause, either party may initiate arbitration under this subdivision by providing the other party with a written demand for arbitration. The arbitration shall be conducted under the following procedures:
(a) Venue for the arbitration shall be within the county of the court's jurisdiction or another location agreed to by the parties;
(b) Within thirty days of the responding party's receipt of the arbitration demand, each party shall appoint an arbitrator who is a disinterested active or retired officer or executive of a life insurance or reinsurance company, or other professional with no less than ten years' experience in or relating to the field of life insurance or life reinsurance. The two arbitrators shall appoint an independent, impartial, disinterested umpire who is an active or retired officer or executive of a life insurance or reinsurance company, or other professional with no less than ten years' experience in the field of life insurance or life reinsurance. If the arbitrators are unable to agree on an umpire, each arbitrator shall provide the other with the names of three qualified individuals, each arbitrator shall strike two names from the other's list and the umpire shall be chosen by drawing lots from the remaining individuals;
(c) Within sixty days following the appointment of the umpire, the parties shall, unless otherwise ordered by the panel, submit to the arbitration panel their estimates of the sum due as a result of the termination of the reinsurance contract, together with all relevant documents and other information supporting the estimate;
(d) The time periods set forth in paragraphs (a) to (c) of this subdivision may be extended upon mutual agreement of the parties;
(e) The panel shall have all powers necessary to conduct the arbitration proceedings in a fair and appropriate manner, including the power to request additional information from the parties, authorize discovery, hold hearings, and hear testimony. The panel also may, if it deems necessary, appoint independent actuarial experts, the expense of which shall be shared equally between the parties;
(5) An arbitration panel considering the matters set forth in this subsection shall apply the standards set forth in subdivision (2) of this subsection and shall issue a written award specifying a net settlement amount due from one party or the other as a result of the termination of the reinsurance contract. The supervising court shall confirm that award absent proof of statutory grounds for vacating or modifying arbitration awards under the Federal Arbitration Act; and
(6) If the net settlement amount agreed or awarded under this subsection is payable by the reinsurer, the reinsurer shall pay the amount due to the estate subject to any applicable setoff under section 375.1198. If the net settlement amount agreed or awarded under this subsection is payable by the insurer, the reinsurer shall be deemed to have a timely filed claim against the estate for that amount, which claim shall be paid under the priority established in subsection 6 of section 375.1218. The guaranty associations shall not be entitled to receive the net settlement amount, except to the extent they are entitled to share in the estate assets as creditors of the estate, and shall have no responsibility for the net settlement amount.
10. Except as otherwise provided in this section, nothing in this section shall:
(1) Alter or modify the terms and conditions of any reinsurance contract;
(2) Abrogate or limit any rights of any reinsurer to claim that it is entitled to rescind a reinsurance contract;
(3) Give a policyholder or beneficiary an independent cause of action against a reinsurer that is not otherwise set forth in the reinsurance contract;
(4) Limit or affect any guaranty association's rights as a creditor of the estate against the assets of the estate; and
(5) Apply to reinsurance agreements covering property or casualty risks.
•
