Print Friendly HOUSE BILL NO. 493 – Insurers, deposit requirements
HOUSE BILL NO. 493
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INSURERS - DEPOSIT REQUIREMENTS - Amends and repeals existing law relating
to foreign and alien insurers to clarify an exception to the requirement of
deposit based upon a certificate from the insurer's state of domicile; and
to repeal language relating to special deposits for foreign or alien
insurers writing workmen's compensation coverages in Idaho.
01/20 House intro - 1st rdg - to printing
01/21 Rpt prt - to Bus
02/10 Rpt out - rec d/p - to 2nd rdg
02/11 2nd rdg - to 3rd rdg
02/17 3rd rdg - PASSED - 67-0-3
AYES -- Andersen, Barraclough, Barrett, Bauer, Bayer, Bedke, Bell,
Black, Block, Boe, Bolz, Bradford, Campbell, Cannon, Clark, Collins,
Crow, Deal, Denney, Douglas, Eberle, Edmunson, Ellsworth, Eskridge,
Field(18), Field(23), Gagner, Garrett, Harwood, Henbest, Jaquet,
Kellogg(Nonini), Kulczyk, Lake, Langford, Langhorst, Martinez,
McGeachin, McKague, Meyer, Miller, Mitchell, Moyle, Naccarato,
Nielsen, Pasley-Stuart, Raybould, Ridinger, Ring, Ringo, Roberts,
Robison, Rydalch, Sali, Sayler, Schaefer, Shepherd, Shirley, Skippen,
Smith(30), Smith(24), Smylie, Snodgrass, Trail, Wills, Wood, Mr.
NAYS -- None
Absent and excused -- Cuddy, Jones, Stevenson
Floor Sponsor - Henbest
Title apvd - to Senate
02/18 Senate intro - 1st rdg - to Com/HuRes
02/25 Rpt out - rec d/p - to 2nd rdg
02/26 2nd rdg - to 3rd rdg
03/10 3rd rdg - PASSED - 35-0-0
AYES -- Andreason(Andreason), Bailey, Brandt, Bunderson, Burkett,
Burtenshaw, Calabretta, Cameron, Compton, Darrington, Davis, Gannon,
Geddes, Goedde, Hill, Ingram, Kennedy, Keough, Little, Lodge,
Malepeai, Marley, McKenzie, McWilliams, Noble, Noh, Pearce,
Richardson, Schroeder, Sorensen, Stegner, Stennett, Sweet, Werk,
NAYS -- None
Absent and excused -- None
Floor Sponsor - Goedde
Title apvd - to House
03/11 To enrol
03/12 Rpt enrol - Sp signed
03/15 Pres signed
03/16 To Governor
03/19 Governor signed
Session Law Chapter 90
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-seventh Legislature Second Regular Session - 2004
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 493
BY BUSINESS COMMITTEE
1 AN ACT
2 RELATING TO FOREIGN AND ALIEN INSURERS; AMENDING SECTION 41-316, IDAHO CODE,
3 TO CLARIFY AN EXCEPTION TO THE REQUIREMENT OF DEPOSIT BASED UPON A CERTIF-
4 ICATE FROM THE INSURER'S STATE OF DOMICILE AND TO MAKE A TECHNICAL CORREC-
5 TION; REPEALING SECTION 41-317, IDAHO CODE, RELATING TO SPECIAL DEPOSITS
6 FOR FOREIGN OR ALIEN INSURERS WRITING WORKMEN'S COMPENSATION COVERAGES IN
7 IDAHO; AMENDING SECTIONS 41-319 AND 41-802, IDAHO CODE, TO REMOVE LANGUAGE
8 REFERENCING SPECIAL DEPOSITS FOR WORKER'S COMPENSATION COVERAGE; AMENDING
9 SECTION 41-803, IDAHO CODE, TO REMOVE A CODE REFERENCE; AMENDING SECTION
10 41-804, IDAHO CODE, TO REMOVE OBSOLETE LANGUAGE APPLICABLE TO SPECIAL
11 DEPOSITS FOR WORKMEN'S COMPENSATION COVERAGE; AND AMENDING SECTION 41-810,
12 IDAHO CODE, TO REMOVE OBSOLETE LANGUAGE APPLICABLE TO SPECIAL DEPOSITS FOR
13 WORKMEN'S COMPENSATION COVERAGE AND TO MAKE TECHNICAL CORRECTIONS.
14 Be It Enacted by the Legislature of the State of Idaho:
15 SECTION 1. That Section 41-316, Idaho Code, be, and the same is hereby
16 amended to read as follows:
17 41-316. DEPOSIT -- FOREIGN OR ALIEN INSURERS. (1) This section shall
18 apply as to all foreign and alien insurers.
19 (2) The director shall not authorize any foreign or alien insurer to
20 transact insurance in this state unless it makes and thereafter maintains in
21 trust in this state through the director for the protection of all its policy-
22 holders or of all its policyholders and creditors, a deposit of cash or secu-
23 rities eligible for deposit under section 41-803, Idaho Code, in the amount of
24 one million dollars ($1,000,000), except that:
25 (a) As to foreign insurers, except foreign title insurers, in lieu of
26 such Idaho deposit, the director shall accept the certificate in proper
27 form of the public official having supervision over insurers in any other
28 the insurer's state of domicile that:
29 (i) A like deposit by such insurer is being maintained in public
30 custody or control for the protection generally of the insurer's pol-
31 icyholders or its policyholders and creditors; and
32 (ii) The insurer is a member in good standing of such state's insur-
33 ance guaranty association or other legal entity created for the same
34 purpose; or if a life or health insurer, the insurer is a member in
35 good standing of such state's insurance guaranty association or other
36 legal entity created for the same purpose, and such guaranty associa-
37 tion does and shall provide protection for its own state's residents.
38 (b) As to foreign title insurers, in lieu of such Idaho deposit, the
39 director shall accept the certificate or certificates in proper form from
40 the public official or officials having supervision over title insurers in
41 any other state or states to the effect that a like deposit or total
42 deposits by such insurer, in an equal or greater amount than required in
43 this section, are being maintained in public custody or control for the
1 protection generally of the insurer's policyholders or its policyholders
2 and creditors.
3 (c) As to alien insurers, in lieu of such deposit or part thereof in this
4 state, the director shall accept evidence satisfactory to him that the
5 insurer maintains within the United States by way of trust deposits with
6 public depositaries, or in trust institutions acceptable to the director,
7 assets available for discharge of its United States insurance obligations,
8 which assets shall be in an amount not less than the outstanding liabili-
9 ties of the insurer arising out of its insurance transactions in the
10 United States together with a surplus equal to the larger of the follow-
11 ing sums:
12 (i) The largest deposit required by this code to be made by a for-
13 eign insurer transacting like kinds of insurance; or
14 (ii) One million dollars ($1,000,000). Such surplus shall for all
15 purposes under this code be deemed to be the "capital" or "surplus"
16 of the insurer.
17 (3) Deposits of foreign or alien insurers in another state shall be in
18 cash and/or securities of substantially as high quality as those eligible for
19 deposit in this state under section 41-803, Idaho Code.
20 (4) All such deposits in this state are subject to the applicable provi-
21 sions of chapter 8 (administration of deposits), title 41, Idaho Code, except
22 that the release and return of deposits brought about by changes to section
23 41-316(2), Idaho Code, effective July 1, 1987, shall not require a hearing
24 thereon as required under section 41-812(2), Idaho Code.
25 (5) Any foreign or alien insurer which requires that its agents maintain
26 a separate trust account for transactions involving that insurer shall make
27 and thereafter maintain in trust in this state, through the director, for the
28 protection of all its policyholders and agents, a deposit of cash or securi-
29 ties eligible for deposit under section 41-803, Idaho Code, in the amount of
30 twenty per cent percent (20%) of its gross written premiums, upon which such
31 insurer is subject to the premium tax of this state under section 41-402,
32 Idaho Code.
33 (6) A foreign or alien insurer holding a valid certificate of authority
34 to transact insurance in this state immediately prior to January 1, 1995,
35 shall have a period of two (2) years from and after that date within which to
36 comply with any increase in deposit requirements.
37 SECTION 2. That Section 41-317, Idaho Code, be, and the same is hereby
39 SECTION 3. That Section 41-319, Idaho Code, be, and the same is hereby
40 amended to read as follows:
41 41-319. APPLICATION FOR CERTIFICATE OF AUTHORITY. To apply for an origi-
42 nal certificate of authority an insurer shall file with the director its
43 application therefor, accompanied by the applicable fees set forth by rule
44 pursuant to section 41-401, Idaho Code, showing its name, location of its home
45 office or principal office in the United States (if an alien insurer), the
46 kinds of insurance to be transacted, date of organization or incorporation,
47 form of organization, state or country of domicile, and such additional infor-
48 mation as the director may reasonably require, together with the following
49 documents, as applicable:
50 (1) If a corporation, two (2) copies (photostatic copies or similar form
51 of reproduction) of its corporate charter, articles of incorporation or other
52 charter documents, with all amendments thereto, currently certified by the
1 public official with whom the originals are on file in the state or country of
3 (2) If a domestic insurer or mutual insurer, one (1) copy (photostatic
4 copy or similar form of reproduction) of its bylaws as amended, certified by
5 the insurer's corporate secretary.
6 (3) If a reciprocal insurer, a copy of the power of attorney of its
7 attorney in fact, and a copy of its subscribers' agreement, if any, both cer-
8 tified by the attorney in fact; and if a domestic reciprocal insurer, the dec-
9 laration provided for in section 41-2908, Idaho Code.
10 (4) A complete copy of its financial statement as of not earlier than the
11 December 31 next preceding in form as customarily used in the United States by
12 like insurers, sworn to by at least two (2) executive officers of the
13 insurer, or certified by the public insurance supervisory official of the
14 insurer's state of domicile or of entry into the United States.
15 (5) Copy of report of last examination, if any, made of the insurer
16 within not more than three (3) years next preceding, certified by the public
17 insurance supervisory official of the insurer's state of domicile or of entry
18 into the United States; or, in the case of newly formed insurers, copy of the
19 report of the "qualifying" examination of the insurer, similarly certified.
20 Provided, however, that if the law of the applicant's state of domicile
21 requires that examinations shall be completed in a period of more than three
22 (3) years or does not specify any period of time for examinations, then the
23 applicant shall provide a copy of a report within not more than the five (5)
24 years next preceding.
25 (6) Appointment of the director pursuant to section 41-333, Idaho Code,
26 as its attorney to receive service of legal process.
27 (7) If a foreign insurer, a certificate of the public insurance supervi-
28 sory official of its state or country of domicile showing that it is autho-
29 rized to transact in such state or country the kind or kinds of insurance pro-
30 posed to be transacted in this state.
31 (8) If a worker's compensation insurer, tender of the special deposit
32 required under section 41-317, Idaho Code.
33 (9) If an alien insurer, a copy of the appointment and authority of its
34 United States manager, certified by its officer having custody of its records.
35 ( 109) If a foreign insurer, certificate as to deposit if to be tendered
36 pursuant to section 41-316, Idaho Code.
37 (1 10) If a life or disability insurer, one (1) copy of the insurer's rate
38 book and of each form of policy proposed to be issued in this state.
39 (1 21) A certificate of the insurer granting authority to an officer or
40 authorized representative of the insurer to appoint and remove agents.
41 SECTION 4. That Section 41-802, Idaho Code, be, and the same is hereby
42 amended to read as follows:
43 41-802. PURPOSE OF DEPOSIT. Such deposits shall be held for purposes as
45 (1) Deposits made in this state under sections 41-316, Idaho Code,
46 (foreign and alien insurance deposit requirements), and 41-316A, Idaho Code,
47 (domestic insurance deposit requirements), and 41-317, Idaho Code, (special
48 deposit, workmen's compensation insurer's), shall be held for the purposes
49 stated in the respective sections.
50 (2) A deposit made in this state by a domestic insurer transacting insur-
51 ance in another state, province or country, and as required by the laws of
52 such state, province or country, shall be held for the purpose or purposes
53 specified pursuant to such laws.
1 (3) Deposits of foreign insurers required pursuant to the retaliatory
2 provision, section 41-340, Idaho Code, shall be held for such purposes as are
3 required by such law, and as specified by the director's order by which the
4 deposit is required.
5 SECTION 5. That Section 41-803, Idaho Code, be, and the same is hereby
6 amended to read as follows:
7 41-803. SECURITIES ELIGIBLE FOR DEPOSIT. (1) All such deposits required
8 under sections 41-316 , and 41-316A, and 41-317, Idaho Code, for authority to
9 transact insurance in this state shall consist of certificates of deposit
10 issued by solvent banks, or any combination of securities the market value of
11 which is readily ascertainable and, if negotiable by delivery or assignment,
12 of the kinds described in the following sections:
13 (a) Section 41-707 (public obligations);
14 (b) Section 41-708 (securities of certain federal agencies);
15 (c) Section 41-709 (irrigation district obligations);
16 (d) Section 41-710 (international bank);
17 (e) Section 41-711 (corporate obligations);
18 (f) Section 41-717 (equipment trust obligations); and
19 (g) Section 41-720 (savings and share accounts).
20 (2) Except that the director shall accept as a security eligible for
21 deposit and recognize as part of the deposit any particular valid and enforce-
22 able real estate mortgage already lawfully so on deposit at the effective date
23 of this code, so long as the mortgage continues to qualify for investment of
24 the insurer's funds therein as under chapter 7 of this code and is not in
25 default in any particular.
26 (3) All such deposits required of a domestic insurer pursuant to the laws
27 of another state, province or country shall be comprised of securities, if
28 negotiable by delivery or assignment, of the kind or kinds required or permit-
29 ted by the laws of such state, province or country, except stocks, mortgages
30 of any kind and real estate.
31 (4) Deposits of foreign insurers made in this state under the retaliatory
32 provision, section 41-340, Idaho Code, shall consist of such securities or
33 assets as are required by the director pursuant to such provision.
34 SECTION 6. That Section 41-804, Idaho Code, be, and the same is hereby
35 amended to read as follows:
36 41-804. CUSTODIAL ARRANGEMENTS FOR DEPOSITS. (1) All deposits of insurers
37 made in this state under this code shall be made through the director.
38 (2) The deposits shall be made with and held by the trust department of
39 an established bank located in Idaho, approved by the director for the pur-
40 pose, and under custodial arrangements likewise approved by him. All such cus-
41 todial arrangements shall comply in substance with the requirements of this
42 code as to the amount, purposes, maintenance, initial amounts, release and
43 withdrawal of such a deposit, and as to the rights of the insurer therein.
44 (3) The securities qualified for deposit under this chapter may be depos-
45 ited with a clearing corporation or held in the federal reserve book-entry
46 system. Securities deposited with a clearing corporation or held in the fed-
47 eral reserve book-entry system and used to meet the deposit requirements set
48 forth in this chapter shall be under the control of the director of the
49 department of insurance and shall not be withdrawn by the insurer without the
50 approval of the director. Any insurer holding securities in such manner shall
51 provide evidence satisfactory to the director, issued by its custodian or mem-
1 ber bank through which such insurer has deposited such securities in a clear-
2 ing corporation or through which such securities are held in the federal
3 reserve book-entry system, respectively, in order to establish that the secu-
4 rities are actually recorded in an account in the name of the custodian or
5 other direct participant or member bank, and that the records of the custo-
6 dian, other participant or member bank reflect that such securities are held
7 subject to the order of the director. Definitions contained in section
8 41-2870, Idaho Code, shall apply to this subsection (3).
9 (4) The cost of any such custodial arrangements shall be borne by the
10 insurer. The state of Idaho shall have no responsibility for the safekeeping
11 of the deposit.
12 (5) This section does not apply to the deposit of a workmen's compensa-
13 tion insurer made with the state treasurer pursuant to section 41-317, Idaho
14 Code (special deposit, workmen's compensation insurers).
15 SECTION 7. That Section 41-810, Idaho Code, be, and the same is hereby
16 amended to read as follows:
17 41-810. LEVY UPON DEPOSIT. (1) No judgment creditor or other claimant of
18 an insurer shall have the right to levy upon any of the assets or securities
19 of the insurer held on deposit in this state pursuant to section 41-316 or
20 41-316A, Idaho Code.
21 (2) As to deposits made in this state pursuant to the retaliatory provi-
22 sion, section 41-340, Idaho Code, levy thereupon shall be permitted only if
23 expressly so provided in the director's order under which the deposit is
25 (3) As to the special deposit of a workmen's compensation insurer or the
26 deposit of a title insurer, if upon expiration of thirty (30) days after the
27 judgment became final the insurer has failed to satisfy in full any final
28 judgment rendered against it by a court of this state and arising out of any
29 contract of insurance or guaranty issued by it, if a title insurer, or out of
30 any contract of workmen's compensation insurance issued by it if a workmen's
31 compensation insurer, the judgment may be enforced against the insurer's
32 deposit. For the purposes of this provision a judgment shall be deemed to have
33 become final upon expiration of the period permitted by law for an appeal, or,
34 if an appeal is taken, upon dismissal of the appeal or affirmance of the judg-
36 (4) To obtain the enforcement referred to in subsection (3) of this sec-
37 tion, the judgment creditor shall petition the court in the same cause in
38 which the judgment was obtained, setting forth the facts referred to in sub-
39 section (3) of this section, and the court shall direct issuance of a special
40 execution directed to the sheriff of Ada county of this state requiring the
41 sheriff to sell the assets and securities of the insurer on deposit or so much
42 thereof as may be necessary to satisfy the judgment. The court's order autho-
43 rizing the special execution shall direct that a copy of the judgment, peti-
44 tion, and writ of execution shall be served upon the director , and also upon
45 the state treasurer in the case of a levy upon the special deposit of an
46 insurer made pursuant to section 41-317, Idaho Code, within five (5) days
47 thereafter. Upon receipt of such service the director shall forthwith notify
48 the insurer of the levy and , in all cases other than as to the special deposit
49 of an insurer under section 41-317, Idaho Code, require the insurer within
50 such period as may be specified in the notice, which period shall be not less
51 than ten (10) nor more than thirty (30) days after the date of the notice, to
52 have its president or other duly authorized representative to attend with the
53 insurer's key and the director to the opening of the box in which the
1 insurer's deposit is kept. Upon the box being so opened the director shall
2 extract therefrom and deliver to the sheriff for sale on execution deposited
3 assets or securities of the insurer in amount, up to the full amount so on
4 deposit, not less than as required for the satisfaction of the judgment. In
5 case of a levy upon the special deposit of an insurer made under section
6 41-317, Idaho Code, and failure of the insurer fully to pay and discharge such
7 judgment within forty (40) days after the date of notice by the director, the
8 state treasurer shall deliver to the sheriff for sale on execution so much of
9 the insurer's securities or assets so on deposit as may be required to cover
10 the judgment and attendant costs. All proceedings for the enforcement of the
11 writ of execution against the deposit shall conform as nearly as may be to the
12 practice in ordinary cases except as in this subsection specially provided.
13 (5) If the insurer, after notice by the director as required under sub-
14 section (4) of this section, wilfully willfully fails to attend to the opening
15 of the box in which its deposit is kept, or wilfully willfully fails to permit
16 the director to extract therefrom assets or securities as in subsection (4) of
17 this section provided, the director shall after hearing held thereon forthwith
18 revoke the insurer's certificate of authority and institute proceedings for
19 the rehabilitation or liquidation of the insurer under chapter 33 of this
20 code. In any such proceedings the judgment with respect to which execution was
21 issued and leading to the insurer's failure as herein referred to, shall have
22 a first and prior right and claim as to the assets and securities of the
23 insurer constituting its deposit as levied against, as of the date of service
24 upon the director of the copy of the judgment, petition, and writ of execution
25 as provided for in subsection (4) of this section.
STATEMENT OF PURPOSE
This bill amends provisions of Title 41 relating to deposits
insurers must maintain for the protection of policyholders in order
to obtain a certificate of authority to transact insurance in
Idaho. It amends Idaho Code Section 41-316 to require that the
deposit be maintained either in the insurer's state of domicile or
in Idaho. In the past, some insurers have attempted to meet the
deposit requirement by relying on deposits maintained in states
other than their state of domicile or in Idaho. These deposits,
however, are often limited to protecting the policyholders in the
state in which they are maintained and would not provide any
benefit to Idaho policyholders in the event the insurer became
insolvent. This bill also repeals the requirement that workers
compensation insurers maintain a special $25,000 deposit with the
Idaho State Treasurer. This section is unnecessary because by
statute and rule the Industrial Commission also imposes a $25,000
deposit requirement on workers compensation insurers.
There will be no fiscal impact.
Name: Georgia Hill
Agency: Department of Insurance
Statement of Purpose/Fiscal Impact H 493