2004 Legislation
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HOUSE BILL NO. 493 – Insurers, deposit requirements


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Bill Status

H0493...........................................................by BUSINESS
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
         Effective: 07/01/04

Bill Text

  ]]]]              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
 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
 38    repealed.
 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
  2    domicile.
  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        (110) 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        (121) 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
 44    follows:
 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
 24    required.
 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-
 35    ment.
 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 / Fiscal Impact

                     STATEMENT  OF  PURPOSE
                            RS 13507
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.

                         FISCAL  IMPACT
There will be no fiscal impact.

Name:     Georgia Hill
Agency:   Department of Insurance
Phone:    334-4314

Statement of Purpose/Fiscal Impact                     H 493