2005 Legislation
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HOUSE BILL NO. 112 – Insurer, domestic reciprocal


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Bill Status

H0112...........................................................by BUSINESS
DOMESTIC RECIPROCAL INSURER - Amends existing law to delete language
applicable to domestic reciprocal insurers which exclusively insure members
who are governmental entities.
02/04    House intro - 1st rdg - to printing
02/07    Rpt prt - to Bus
02/16    Rpt out - rec d/p - to 2nd rdg
02/17    2nd rdg - to 3rd rdg
02/18    3rd rdg - PASSED - 63-0-7
      AYES -- Anderson, Andrus, Barraclough, Barrett, Bastian, Bayer,
      Bedke, Bell, Bilbao, Black, Block, Boe, Bolz, Bradford, Cannon,
      Collins, Crow, Deal, Denney, Edmunson, Ellsworth, Eskridge,
      Field(18), Field(23), Garrett, Hart, Harwood, Henbest, Jaquet, Jones,
      Kemp, Lake, LeFavour, Loertscher, Martinez, Mathews, McGeachin,
      McKague, Miller, Mitchell, Moyle, Nielsen, Pasley-Stuart, Pence,
      Ring, Roberts, Rusche, Rydalch, Sali, Sayler, Schaefer, Shepherd(2),
      Shepherd(8), Shirley, Skippen, Smith(30), Smith(24), Smylie,
      Snodgrass, Trail, Wills, Wood, Mr. Speaker
      NAYS -- None
      Absent and excused -- Chadderdon, Clark, Henderson, Nonini, Raybould,
      Ringo, Stevenson
    Floor Sponsor - Snodgrass
    Title apvd - to Senate
02/22    Senate intro - 1st rdg - to Com/HuRes
03/04    Rpt out - rec d/p - to 2nd rdg
03/07    2nd rdg - to 3rd rdg
03/11    3rd rdg - PASSED - 32-0-2, 1 vacancy
      AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett,
      Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis,
      Gannon, Geddes, Goedde, Jorgenson, Kelly, Keough, Langhorst, Little,
      Lodge, Malepeai, Marley, McGee, McKenzie, Pearce, Richardson,
      Schroeder, Stegner, Stennett, Werk, Williams
      NAYS -- None
      Absent and excused -- Hill, Sweet, (District 21 seat vacant)
    Floor Sponsor - Goedde
    Title apvd - to House
03/14    To enrol
03/15    Rpt enrol - Sp signed
03/16    Pres signed
03/17    To Governor
03/21    Governor signed
         Session Law Chapter 72
         Effective: 07/01/05

Bill Text

  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   First Regular Session - 2005
                              IN THE HOUSE OF REPRESENTATIVES
                                     HOUSE BILL NO. 112
                                   BY BUSINESS COMMITTEE
  1                                        AN ACT
  5    Be It Enacted by the Legislature of the State of Idaho:
  6        SECTION 1.  That Section 41-2918, Idaho Code, be, and the same  is  hereby
  7    amended to read as follows:
  8        41-2918.  FINANCIAL CONDITION -- METHOD OF DETERMINING. In determining the
  9    financial  condition of a reciprocal insurer the director shall apply the fol-
 10    lowing rules:
 11        (1)  He shall charge as liabilities the same reserves as are  required  of
 12    incorporated insurers issuing nonassessable policies on a reserve basis.
 13        (2)  The  surplus  deposits  of  subscribers  shall  be allowed as assets,
 14    except that any premium deposits delinquent for ninety (90) days  shall  first
 15    be charged against such surplus deposit.
 16        (3)  The surplus deposits of subscribers shall not be charged as a liabil-
 17    ity.
 18        (4)  All  premium  deposits delinquent less than ninety (90) days shall be
 19    allowed as assets.
 20        (5)  An assessment levied upon subscribers, and not collected,  shall  not
 21    be allowed as an asset.
 22        (6)  The  contingent  liability  of subscribers shall not be allowed as an
 23    asset.
 24        (7)  The computation of reserves shall  be  based  upon  premium  deposits
 25    other than membership fees and without any deduction for expenses and the com-
 26    pensation of the attorney.
 27        (8)  A  domestic reciprocal insurer, which exclusively insures members who
 28    are governmental entities, as defined in subsections 1, 2  and  3  of  section
 29    6-902,  Idaho Code, shall establish a loss paying fund in an amount sufficient
 30    to meet the requirements of the reinsurer for the purpose of purchasing excess
 31    of aggregate reinsurance. A loss paying fund is defined  for  the  purpose  of
 32    this  title as funds set aside or maintained for the purpose of paying claims,
 33    claims costs including adjustment costs, litigation fees and court  costs  and
 34    other  related  costs. Excess of aggregate reinsurance is defined for the pur-
 35    poses of this title as insurance coverage provided by a reinsurer wherein  the
 36    reinsurer  assumes  the  loss  above the retentions or loss paying fund of the
 37    reinsured. Its purpose is to limit aggregate loss over a specified  period  of
 38    time.
 39        The excess of aggregate reinsurance shall carry at least a thirty (30) day
 40    written  cancellation  clause. If the reinsurer elects to cancel the excess of
 41    aggregate reinsurance contract, a copy of the cancellation notice must be for-
 42    warded immediately to the director of the department of insurance of the state
 43    of Idaho.
  1        SECTION 2.  That Section 41-2926, Idaho Code, be, and the same  is  hereby
  2    amended to read as follows:
  3        41-2926.  NONASSESSABLE  POLICIES.  (1)  Nongovernmental  entities.  If  a
  4    reciprocal insurer has a surplus of assets over all liabilities at least equal
  5    to  the  total  surplus  required  in  section  41-313, Idaho Code, as to such
  6    insurer, upon application of the attorney and as approved by the  subscribers'
  7    advisory  committee  the  director shall issue his certificate authorizing the
  8    insurer to extinguish the contingent liability of subscribers under its  poli-
  9    cies  then  in force in this state, and to omit provisions imposing contingent
 10    liability in all policies delivered or issued for delivery in this  state  for
 11    so long as all such surplus remains unimpaired.
 12        (2)  Upon  impairment of such surplus, the director shall forthwith revoke
 13    the certificate. Such revocation shall not render subject to  contingent  lia-
 14    bility  any policy then in force and for the remainder of the period for which
 15    the premium has theretofore been paid; but after  such  revocation  no  policy
 16    shall be issued or renewed without providing for contingent assessment liabil-
 17    ity of the subscriber.
 18        (3)  The  director shall not authorize a domestic reciprocal insurer so to
 19    extinguish the contingent liability of any of its subscribers or in any of its
 20    policies to be issued, unless it qualifies to and does extinguish such liabil-
 21    ity of all its subscribers and in all such policies for all kinds of insurance
 22    transacted by it. Except, that if required by the laws  of  another  state  in
 23    which  the  insurer  is  transacting  insurance  as an authorized insurer, the
 24    insurer may issue policies providing for the contingent liability of  such  of
 25    its  subscribers  as  may  acquire  such  policies in such state, and need not
 26    extinguish the contingent liability  applicable  to  policies  theretofore  in
 27    force in such state.
 28        (4)  Governmental  entities.  If a domestic reciprocal insurer licensed to
 29    do business in this state as such and insuring only governmental  entities  of
 30    this  state  has  a  loss paying fund as required by section 41-2918(8), Idaho
 31    Code, the director shall issue his  certificate  authorizing  the  insurer  to
 32    extinguish any contingent liability of the member under its policy or policies
 33    and to omit provisions imposing contingent liability in all policies delivered
 34    or issued for delivery in this state.

Statement of Purpose / Fiscal Impact

                     STATEMENT  OF  PURPOSE

                            RS 14416

The subsection proposed for repeal by this legislation allowed a
reciprocal insurer made up of only governmental entities to operate
without meeting financial surplus requirements applicable to other
types of insurers if the reciprocal insurer maintained reinsurance
and a loss paying fund.  In 1986, legislation was adopted that
required all reciprocal insurers, including those made up
exclusively of governmental entities, to meet financial surplus
requirements.  As a result of this change, the requirement for
reinsurance and a loss paying fund is no longer necessary. 

                         FISCAL  IMPACT


Name:     Shad Priest
Agency:   Insurance, Dept. of
Phone:    334-4214

Statement of Purpose/Fiscal Impact                   H 112