ENROLLED
Senate Bill No. 459
(By Senator Minard)
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[Passed April 7, 2005; in effect ninety days from passage.]
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AN ACT to amend and reenact §33-4-15 of the Code of West Virginia,
1931, as amended; and to amend said code by adding thereto a
new section, designated §33-10-41, all relating to
reinsurance; and a reinsurer's liability in an insolvency.
Be it enacted by the Legislature of West Virginia:
That §33-4-15 of the Code of West Virginia, 1931, as amended,
be amended and reenacted; and that said code be amended by adding
thereto a new section, designated §33-10-41, all to read as
follows:
ARTICLE 4. GENERAL PROVISIONS.
§33-4-15. Reinsurance.
(a) For purposes of this section, an "assumption reinsurance
agreement" means any contract which:
(1) Transfers insurance obligations and/or risks of existing or in-force contracts of insurance from a transferring insurer to
an assuming insurer; and
(2) Is intended to effect a novation of the transferred
contract of insurance with the result that the assuming insurer
becomes directly liable to the policyholders of the transferring
insurer and the transferring insurer's insurance obligations and/or
risks under the contracts are extinguished.
(b) An insurer shall reinsure its risks, or any part thereof,
only in solvent insurers complying with the capital and surplus
requirements of section five-b, article three of this chapter.
(c) Credit for reinsurance shall be governed by the provisions
of sections fifteen-a and fifteen-b of this article.
(1) No credit shall be allowed, as an admitted asset or
deduction from liability, to any ceding insurer for reinsurance,
unless the reinsurance contract provides, in substance, that in the
event of the insolvency of the ceding insurer, the reinsurance
shall be payable under a contract reinsured by the assuming insurer
on the basis of reported claims allowed by the liquidation court,
without diminution because of the insolvency of the ceding insurer.
Payments shall be made directly to the ceding insurer or to its
domiciliary liquidator except: (A) Where 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) where the assuming insurer, with the consent of the direct
insured, has assumed the policy obligations of the ceding insurer
as direct obligations of the assuming insurer to the payees under
the policies and in substitution for the obligations of the ceding
insurer to payees.
(2) The reinsurance agreement may provide that the domiciliary
liquidator of an insolvent ceding insurer shall give written notice
to the assuming insurer of the pendency of a claim against the
ceding insurer on the contract reinsured within a reasonable time
after the claim is filed in the liquidation proceeding. During the
pendency of the claim, any assuming insurer may investigate the
claim and interpose, at its own expense, in the proceeding where
the claim is to be adjudicated any defenses which it deems
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 which may accrue to
the ceding insurer solely as a result of the defense undertaken by
the assuming insurer. Where two or more assuming insurers are
involved in the same claim and a majority in interest elect to
interpose a defense 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.
(d) Any licensed insurer may accept reinsurance for the same kinds of insurance and within the same limits as it is authorized
to transact direct insurance.
(e) A licensed insurer may reinsure all or substantially all
of its risks on property or lives located in West Virginia, or
substantially all of a major class thereof, with another insurer by
an assumption reinsurance agreement:
Provided, That the assumption
reinsurance agreement shall not become effective unless filed in
advance with and approved in writing by the Commissioner:
Provided, however, That if a licensed insurer is deemed by the
Commissioner to be in hazardous financial condition, as defined in
article thirty-four-a of this chapter, or an administrative or
judicial proceeding has been instituted against it for the purpose
of liquidating, reorganizing or conserving the insurer, and the
transfer of the contracts of insurance is determined by the
Commissioner to be in the best interest of the policyholders, the
Commissioner may by written order waive the advance filing and
approval required by this section, which waiver may include a form
of implied consent and adequate notification to the policyholder of
the circumstances requiring the transfer.
(f) The Commissioner shall approve a reinsurance agreement
within one hundred twenty days after the filing of same unless he
or she finds that it is inequitable to the licensed insurer, its
owners or its policyholders or would substantially reduce the protection or service to its policyholders. If the Commissioner
does not approve the agreement, he or she shall notify the insurer
in writing specifying his or her reasons therefor. If the
Commissioner does not disapprove the agreement within one hundred
twenty days, the agreement shall be deemed approved.
(g) A filing may not be made pursuant to this section unless
the reinsurance agreement is certified under oath by responsible
officers of the reinsurer and the reinsured to contain the entire
agreement between the parties to the reinsurance agreement.
(h) The Commissioner shall promulgate rules pursuant to
chapter twenty-nine-a of this code for the implementation and
administration of the provisions of this section to include, but
not be limited to, the type of assumption agreements subject to the
provisions of this section, their content and the standards the
Commissioner may utilize in reviewing the agreements.
(i) Any insurer subject to this section is also subject to the
provisions of article thirty-eight of this chapter.
ARTICLE 10. REHABILITATION AND LIQUIDATION.
§33-10-41. Reinsurer's liability.
The amount recoverable by the liquidator from reinsurers may
not be reduced as a result of delinquency proceedings unless the
reinsurance contract provides, in substance, that in the event of
the insolvency of the ceding insurer, the reinsurance shall be payable under a contract reinsured by the assuming insurer on the
basis of reported claims allowed by the liquidation court, without
diminution because of the insolvency of the ceding insurer. The
payments shall be made directly to the ceding insurer or to its
domiciliary liquidator except: (1) Where the contract or other
written agreement specifically provides another payee of the
reinsurance in the event of the insolvency of the ceding insurer;
or (2) where the assuming insurer, with the consent of the direct
insured, has assumed the policy obligations of the ceding insurer
as direct obligations of the assuming insurer to the payees under
the policies and in substitution for the obligations of the ceding
insurer to the payees.