FLOOR BOOK MEMORANDUM            House Committee on the Judiciary

            H.B. 2461                                                       

Prepared by: Mark Adkins

            (2/16/2015)                                                     Phone: 304-340-3133

                                                                                    email: mark.adkins@wvhouse.gov

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SPONSORS: Delegates Walters, McCuskey, Frich, Azinger, Westfall, Moore, Skinner, Perry, Perdue, Bates, Nelson, E.

TITLE: Relating to delinquency proceedings of insurers

DATE INTRODUCED: January 28, 2015; referred to the Committee on Banking and Insurance, then Judiciary

CODE SECTION AFFECTED: W.Va. Code §33-10-4 and §33-10-26

IDENTICAL/SIMILAR BILLS: SB313

CHAIRMAN’S SUMMARY: This bill amends existing code as follows:

(1) Delinquency proceedings by the Insurance Commissioner shall not stay a federal home loan bank from asserting its rights against collateral pledged by the insurer;

(2) Transfers made by an insurer to a federal home loan bank in the normal course of business shall not be voided by the receiver if made within four months of commencement of a delinquency proceeding or which received prior approval from the receiver; except if the transfer was made in bad faith;

(3) The federal home loan bank shall, within 10 days of a request from the receiver, provide a process and timing for the following:

(a)       the release of collateral that exceeds the lending value required to support secured obligations remaining after any repayment of advances;

(b)       the release of any collateral remaining in the federal home loan bank’s possession following repayment of all outstanding obligations;

(c)       the payment of fees and the operation of deposits and other accounts with the federal home loan bank; and

(d)       the redemption or repurchase of deposits and other accounts with the federal home loan bank; and

(4) Nothing in W.Va. Code §33-10-26 affects the receiver’s rights pursuant to other federal laws.

FULL ANALYSIS:

I. SUBSTANTIVE ANALYSIS:

            A. EXISTING LAW:

W.Va. Code §33-10-4 - outlines the types of relief that the Insurance Commissioner may seek against an insurer.

W.Va. Code §33-10-26 - identifies voidable preferences made by the insurer.

            B. THIS BILL: This bill would amend the provisions of the WV Code relating to delinquency actions brought by the Commissioner of Insurance. The bill makes non-substantive and technical changes to the current law. It also makes the following substantive changes:

(1)       Provides that the commencement of a delinquency proceeding by the Commissioner of Insurance of an insurer that is a member of a federal home loan bank does not operate as a stay, injunction or prohibition of the exercise by the federal home loan bank of its rights regarding collateral pledged by the insurer-member;

(2)       Prohibits the voidance by the receiver of transfers made by an insurer-member to a federal home loan bank in the ordinary course of business within 4 months of commencement of a delinquency proceedings or which received prior approval of the receiver, except if the transfer was made with actual intent to hinder, delay or defraud the insurer-member, a receiver appointed for the insurer-member or existing or future creditors;

(3)       Requires that upon the request of a receiver, the federal home loan bank shall, within 10 days of the request, provide a process and establish timing for: (a) the release of collateral that exceeds the lending value required to support secured obligations remaining after any repayment of advances; (b) the release of any collateral remaining in the federal home loan bank’s possession following repayment of all outstanding obligations; (c) the payment of fees and the operation of deposits and other accounts with the federal home loan bank; and (d) the redemption or repurchase of deposits and other accounts with the federal home loan bank. In addition, the federal home loan bank shall provide any options for the insurer-member to renew or restructure an advance to defer associated prepayment fees; and

(4)       Provides that nothing in the section affects a receiver’s rights pursuant other federal laws.

II. SECTION DIRECTORY: W.Va. Code §33-10-4 - Injunctions and other orders; §33-10-26 - Voidable preferences and liens.

III. FISCAL ANALYSIS: There is not a Fiscal Note because no fiscal impact has been identified.

IV. COMMENTS

            A. CONSTITUTIONAL ISSUES: None identified

            B. GOVERNMENT AGENCIES AFFECTED: West Virginia Insurance Commission.

            C. RULE MAKING AUTHORITY: None.

            D. COMMITTEE REFERENCE: This bill passed out of the House Committee on Banking and Insurance and then referred to the House Committee on the Judiciary.

            E. TITLE ANALYSIS: This bill’s title appears to be within Constitutional parameters.

            F. DRAFTING ISSUES OR OTHER COMMENTS: None.

            G. EFFECTIVE DATE: Ninety days from passage.