Chapter 434
2017 -- H 6365
Enacted 10/05/2017

A N   A C T
RELATING TO INSURANCE -- CREDIT FOR REINSURANCE ACT

Introduced By: Representatives Kennedy, and O`Grady
Date Introduced: June 27, 2017

It is enacted by the General Assembly as follows:
     SECTION 1. Sections 27-1.1-1, 27-1.1-2 and 27-1.1-4 of the General Laws in Chapter
27-1.1 entitled "Credit for Reinsurance Act" are hereby amended to read as follows:
     27-1.1-1. Credit allowed a domestic ceding insurer.
     (a) Credit for reinsurance shall be allowed a domestic ceding insurer as either an asset or
a reduction from liability on account of reinsurance ceded only when the reinsurer meets the
requirements of subsections (b), (c), (d), (e), (f), or (g) of this section; provided, further, that the
commissioner may adopt by regulation pursuant to §27-1.1-4 specific additional requirements
relating to or setting forth:
     (1) The valuation of assets or reserve credits;
     (2) The amount and forms of security supporting reinsurance arrangements described in
§27-1.1-4; and
     (3) The circumstances pursuant to which credit will be reduced or eliminated.
     Credit shall be allowed under subsections (b), (c), or (d) of this section only as respects
cessions of those kinds or classes of business which the assuming insurer is licensed or otherwise
permitted to write or assume in its state of domicile or, in the case of a U.S. branch of an alien
assuming insurer, in the state through which it is entered and licensed to transact insurance or
reinsurance. Credit shall be allowed under subsections (d) or (e) of this section only if the
applicable requirements of subsection (h) of this section have been satisfied.
     (b) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is
licensed to transact insurance or reinsurance in this state.
     (c) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is
accredited by the commissioner as a reinsurer in this state. In order to be eligible for an
accreditation a reinsurer must:
     (1) File with the commissioner evidence of its submission to this state's jurisdiction;
     (2) Submit to this state's authority to examine its books and records;
     (3) Be licensed to transact insurance or reinsurance in at least one state, or in the case of a
United States branch of an alien assuming insurer, be entered through and licensed to transact
insurance or reinsurance in at least one state;
     (4) Annually file with the commissioner a copy of its annual statement filed with the
insurance department of its state of domicile and a copy of its most recent audited financial
statement,; and:
     (5) Demonstrate to the satisfaction of the commissioner that it has adequate financial
capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from
domestic insurers. An assuming insurer is deemed to meet this requirement as of the time of its
application if it maintains a surplus as regards policyholders in an amount not less than twenty
million dollars ($20,000,000), and its accreditation has not been denied by the commissioner
within ninety (90) days after submission of its application.
     (d) (1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that
is domiciled in, or in the case of a United States branch of an alien assuming insurer is entered
through, a state that employs standards regarding credit for reinsurance substantially similar to
those applicable under this statute, and the assuming insurer or U.S. branch of an alien assuming
insurer:
     (i) Maintains a surplus regarding policyholders in an amount not less than twenty million
dollars ($20,000,000); and
     (ii) Submits to the authority of this state to examine its books and records;.
     (2) Provided, that the requirement of subsection (d)(1)(i) of this section does not apply to
reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same
holding company system.
     (e) (1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that
maintains a trust fund in a qualified United States financial institution, as defined in section§ 27-
1.1-3(b), for the payment of the valid claims of its United States ceding insurers, their assigns,
and successors in interest. To enable the commissioner to determine the sufficiency of the trust
fund, the assuming insurer shall report annually to the commissioner information substantially the
same as that required to be reported on the National Association of Insurance Commissioners
(NAIC) annual statement form by licensed insurers. The assuming insurer shall submit to
examination of its books and records by the commissioner, and bear the expense of examination.
     (2) (i) Credit for reinsurance shall not be granted under this subsection unless the form of
the trust and any amendments to the trust have been approved by:
     (A) The commissioner of the state where the trust is domiciled; or
     (B) The commissioner of another state who, pursuant to the terms of the trust instrument,
has accepted principal regulatory oversight of the trust.
     (ii) The form of the trust and any trust amendments shall also be filed with the
commissioner of every state in which the ceding insurer beneficiaries of the trust are domiciled.
The trust instrument shall provide that contested claims shall be valid and enforceable upon the
final order of any court of competent jurisdiction in the United States. The trust shall vest legal
title to its assets in its trustees for the benefit of the assuming insurer's U.S. ceding insurers, their
assigns, and successors in interest. The trust and the assuming insurer shall be subject to
examination as determined by the commissioner.
     (iii) The trust shall remain in effect for as long as the assuming insurer has outstanding
obligations due under the reinsurance agreements subject to the trust. No later than February 28
of each year the trustee of the trust shall report to the commissioner in writing the balance of the
trust and listing the trust's investments at the preceding year end and shall certify the date of
termination of the trust, if so planned, or certify that the trust will not expire prior to the following
December 31.
     (3) The following requirements apply to the following categories of assuming insurer:
     (i) The trust fund for a single assuming insurer shall consist of funds in trust in an amount
not less than the assuming insurer's liabilities attributable to reinsurance ceded by U.S. ceding
insurers, and, in addition, the assuming insurer shall maintain a trusteed surplus of not less than
twenty million dollars ($20,000,000), except as provided in paragraph (3)(ii)below subsection
(e)(3)(ii);
     (ii) At any time after the assuming insurer has permanently discontinued underwriting
new business secured by the trust for at least three (3) full years, the commissioner with principal
regulatory oversight of the trust may authorize a reduction in the required trusteed surplus, but
only after a finding, based on an assessment of the risk, that the new required surplus level is
adequate for the protection of U.S. ceding insurers, policyholders, and claimants in light of
reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial
review, including an independent analysis of reserves and cash flows, and shall consider all
material risk factors, including, when applicable, the lines of business involved,; the stability of
the incurred loss estimates; and the effect of the surplus requirements on the assuming insurer's
liquidity or solvency. The minimum required trusteed surplus may not be reduced to an amount
less than thirty percent (30%) of the assuming insurer's liabilities attributable to reinsurance ceded
by U.S. ceding insurers covered by the trust.;
     (iii) (A) In the case of a group including incorporated and individual unincorporated
underwriters:
     (B) For reinsurance ceded under reinsurance agreements with an inception, amendment
or renewal date on or after January 1, 1993, the trust shall consist of a trusteed account in an
amount not less than the respective underwriters' several liabilities attributable to business ceded
by U.S. domiciled ceding insurers to any underwriter of the group;
     (C) For reinsurance ceded under reinsurance agreements with an inception date on or
before December 31, 1992, and not amended or renewed after that date, not-withstanding
notwithstanding the other provisions of this chapter, the trust shall consist of a trusteed account
in an amount not less than the respective underwriters' several insurance and reinsurance
liabilities attributable to business written in the United States;
     (D) In addition to these trusts, the group shall maintain in trust a trusteed surplus of
which one hundred million dollars ($100,000,000) shall be held jointly for the benefit of the U.S.
domiciled ceding insurers of any member of the group for all years of account; and
     (E) The incorporated members of the group shall not be engaged in any business other
than underwriting as a member of the group and shall be subject to the same level of regulation
and solvency control by the group's domiciliary regulator as are the unincorporated members.;
and
     (I)(F) Within ninety (90) days after its financial statements are due to be filed with the
group's domiciliary regulator, the group shall provide to the commissioner an annual certification
by the group's domiciliary regulator of the solvency of each underwriter member; or if a
certification is unavailable, financial statements, prepared by independent public accountants, of
each underwriter member of the group.; and
     (iv) In the case of a group of incorporated underwriters under common administration the
group shall:
     (A) Have continuously transacted an insurance business outside the United States for at
least three (3) years immediately prior to making application for accreditation,;
     (B) Maintain an aggregate policyholders surplus of ten billion dollars ($10,000,000,000).;
     (C) Maintain a trust fund in an amount not less than the group's several liabilities
attributable to business ceded by United States domiciled ceding insurers to any member of the
group pursuant to reinsurance contracts issued in the name of the group.;
     (D) In addition, maintain a joint trusted surplus of which one hundred million dollars
($100,000,000) shall be held jointly for the benefit of U.S. domiciled ceding insurers of any
member of the group as additional security for these liabilities,; and
     (E) Within ninety (90) days after its financial statements are due to be filed with the
group's domiciliary regulator, make available to the commissioner an annual certification of each
underwriter member's solvency by the member's domiciliary regulator, and financial statements
of each underwriter member of the group prepared by its independent public accountant;.
     (f) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that has
been certified by the commissioner as a reinsurer in this state and secures its obligations in
accordance with the requirements of this subsection.
     (1) In order to be eligible for certification, the assuming insurer shall meet the following
requirements:
     (i) The assuming insurer must be domiciled and licensed to transact insurance or
reinsurance in a qualified jurisdiction, as determined by the commissioner pursuant to paragraph
(f)(iii) of this subsection;
     (ii) The assuming insurer must maintain minimum capital and surplus, or its equivalent,
in an amount to be determined by the commissioner pursuant to regulation;
     (iii) The assuming insurer must maintain financial strength ratings from two or more
rating agencies deemed acceptable by the commissioner pursuant to regulation;
     (iv) The assuming insurer must agree to submit to the jurisdiction of this state, appoint
the commissioner as its agent for service of process in this state, and agree to provide security for
one hundred percent (100%) of the assuming insurer's liabilities attributable to reinsurance ceded
by U.S. ceding insurers if it resists enforcement of a final U.S. judgment;
     (v) The assuming insurer must agree to meet applicable information filing requirements
as determined by the commissioner, both with respect to an initial application for certification and
on an ongoing basis; and
     (vi) The assuming insurer must satisfy any other requirements for certification deemed
relevant by the commissioner.
     (2) An association including incorporated and individual unincorporated underwriters
may be a certified reinsurer. In order to be eligible for certification, in addition to satisfying
requirements of paragraph (i) above subsection (f)(1)(i) above:
     (i) The association shall satisfy its minimum capital and surplus requirements through the
capital and surplus equivalents (net of liabilities) of the association and its members, which shall
include a joint central fund that may be applied to any unsatisfied obligation of the association or
any of its members, in an amount determined by the commissioner to provide adequate
protection;
     (ii) The incorporated members of the association shall not be engaged in any business
other than underwriting as a member of the association and shall be subject to the same level of
regulation and solvency control by the association's domiciliary regulator as are the
unincorporated members; and
     (iii) Within ninety (90) days after its financial statements are due to be filed with the
association's domiciliary regulator, the association shall provide to the commissioner an annual
certification by the association's domiciliary regulator of the solvency of each underwriter
member; or if a certification is unavailable, financial statements, prepared by independent public
accountants, of each underwriter member of the association.
     (3) The commissioner shall create and publish a list of qualified jurisdictions, under
which an assuming insurer licensed and domiciled in such jurisdiction is eligible to be considered
for certification by the commissioner as a certified reinsurer.
     (i) In order to determine whether the domiciliary jurisdiction of a non-U.S. assuming
insurer is eligible to be recognized as a qualified jurisdiction, the commissioner shall evaluate the
appropriateness and effectiveness of the reinsurance supervisory system of the jurisdiction, both
initially and on an ongoing basis, and consider the rights, benefits, and the extent of reciprocal
recognition afforded by the non-U.S. jurisdiction to reinsurers licensed and domiciled in the U.S.
A qualified jurisdiction must agree to share information and cooperate with the commissioner
with respect to all certified reinsurers domiciled within that jurisdiction. A jurisdiction may not be
recognized as a qualified jurisdiction if the commissioner has determined that the jurisdiction
does not adequately and promptly enforce final U.S. judgments and arbitration awards.
Additional factors may be considered in the discretion of the commissioner.;
     (ii) A list of qualified jurisdictions shall be published through the NAIC committee
process. The commissioner shall consider this list in determining qualified jurisdictions. If the
commissioner approves a jurisdiction as qualified that does not appear on the list of qualified
jurisdictions, the commissioner shall provide thoroughly documented justification in accordance
with criteria to be developed under regulations.;
     (iii) U.S. jurisdictions that meet the requirement for accreditation under the NAIC
financial standards and accreditation program shall be recognized as qualified jurisdictions.; and
     (iv) If a certified reinsurer's domiciliary jurisdiction ceases to be a qualified jurisdiction,
the commissioner has the discretion to suspend the reinsurer's certification indefinitely, in lieu of
revocation.
     (4) The commissioner shall assign a rating to each certified reinsurer, giving due
consideration to the financial strength ratings that have been assigned by rating agencies deemed
acceptable to the commissioner pursuant to regulation. The commissioner shall publish a list of
all certified reinsurers and their ratings.
     (5) A certified reinsurer shall secure obligations assumed from U.S. ceding insurers under
this subsection at a level consistent with its rating, as specified in regulations promulgated by the
commissioner.
     (i) In order for a domestic ceding insurer to qualify for full financial statement credit for
reinsurance ceded to a certified reinsurer, the certified reinsurer shall maintain security in a form
acceptable to the commissioner and consistent with the provisions of section 3 § 27-1.1-2, or in a
multi-beneficiary trust in accordance with subsection (e) of this section, except as otherwise
provided in this subsection.;
     (ii) If a certified reinsurer maintains a trust to fully secure its obligations subject to
subsection (e) of this section, and chooses to secure its obligations incurred as a certified reinsurer
in the form of a multi-beneficiary trust, the certified reinsurer shall maintain separate trust
accounts for its obligations incurred under reinsurance agreements issued or renewed as a
certified reinsurer with reduced security as permitted by this subsection or comparable laws of
other U.S. jurisdictions and for its obligations subject to subsection (e) of this section. It shall be a
condition to the grant of certification under subsection (f) of this section that the certified
reinsurer shall have bound itself, by the language of the trust and agreement with the
commissioner with principal regulatory oversight of each such trust account, to fund, upon
termination of any such trust account, out of the remaining surplus of such trust any deficiency of
any other such trust account.;
     (iii) The minimum trusteed surplus requirements provided in subsection D are not
applicable with respect to a multi-beneficiary trust maintained by a certified reinsurer for the
purpose of securing obligations incurred under this subsection, except that such trust shall
maintain a minimum trusteed surplus of ten million dollars ($10,000,000).;
     (iv) With respect to obligations incurred by a certified reinsurer under this subsection, if
the security is insufficient, the commissioner shall reduce the allowable credit by an amount
proportionate to the deficiency, and has the discretion to impose further reductions in allowable
credit upon finding that there is a material risk that the certified reinsurer's obligations will not be
paid in full when due.; and
     (v) For purposes of this subsection, a certified reinsurer whose certification has been
terminated for any reason shall be treated as a certified reinsurer required to secure one hundred
percent (100%) of its obligations.
     (A) As used in this subsection, the term "terminated" refers to revocation, suspension,
voluntary surrender and inactive status.; and
     (B) If the commissioner continues to assign a higher rating as permitted by other
provisions of this section, this requirement does not apply to a certified reinsurer in inactive status
or to a reinsurer whose certification has been suspended.
     (6) If an applicant for certification has been certified as a reinsurer in an NAIC-accredited
jurisdiction, the commissioner has the discretion to defer to that jurisdiction's certification, and
has the discretion to defer to the rating assigned by that jurisdiction, and such assuming insurer
shall be considered to be a certified reinsurer in this state.
     (7) A certified reinsurer that ceases to assume new business in this state may request to
maintain its certification in inactive status in order to continue to qualify for a reduction in
security for its in-force business. An inactive certified reinsurer shall continue to comply with all
applicable requirements of this subsection, and the commissioner shall assign a rating that takes
into account, if relevant, the reasons why the reinsurer is not assuming new business.
     (g) Credit shall be allowed when the reinsurance is ceded to an assuming insurer not
meeting the requirements of subsections (b), (c), (d), (e), or (f) of this section, but only as to the
insurance of risks located in jurisdictions where the reinsurance is required by applicable law or
regulation of that jurisdiction.
     (h) If the assuming insurer is not licensed, accredited, or certified to transact insurance or
reinsurance in this state, the credit permitted by subsections (d) and (e) of this section shall not be
allowed unless the assuming insurer agrees in the reinsurance agreements:
     (1) (i) That in the event of the failure of the assuming insurer to perform its obligations
under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding
insurer, shall submit to the jurisdiction of any court of competent jurisdiction in any state of the
United States, will comply with all requirements necessary to give the court jurisdiction, and will
abide by the final decision of the court or of any appellate court in the event of an appeal; and
     (ii) To designate the commissioner or a designated attorney as its true and lawful attorney
upon whom may be served any lawful process in any action, suit, or proceeding instituted by or
on behalf of the ceding insurer.
     (2) This subsection is not intended to conflict with or override the obligation of the
parties to a reinsurance agreement to arbitrate their disputes, if this obligation is created in the
agreement.
     (i) If the assuming insurer does not meet the requirements of subsections (b), (c), or (d),
the credit permitted by subsection (e) or (f) of this section shall not be allowed unless the
assuming insurer agrees in the trust agreements to the following conditions:
     (1) Notwithstanding any other provisions in the trust instrument, if the trust fund is
inadequate because it contains an amount less than the amount required by subsection (e)(iii) of
this section, or if the grantor of the trust has been declared insolvent or placed into receivership,
rehabilitation, liquidation, or similar proceedings under the laws of its state or country of
domicile, the trustee shall comply with an order of the commissioner with regulatory oversight
over the trust or with an order of a court of competent jurisdiction directing the trustee to transfer
to the commissioner with regulatory oversight all of the assets of the trust fund.;
     (2) The assets shall be distributed by and claims shall be filed with and valued by the
commissioner with regulatory oversight in accordance with the laws of the state in which the trust
is domiciled that are applicable to the liquidation of domestic insurance companies.;
     (3) If the commissioner with regulatory oversight determines that the assets of the trust
fund or any part thereof are not necessary to satisfy the claims of the U.S. ceding insurers of the
grantor of the trust, the assets or part thereof shall be returned by the commissioner with
regulatory oversight to the trustee for distribution in accordance with the trust agreement.; and
     (4) The grantor shall waive any right otherwise available to it under U.S. law that is
inconsistent with this provision.
     (j) If an accredited or certified reinsurer ceases to meet the requirements for accreditation
or certification, the commissioner may suspend or revoke the reinsurer's accreditation or
certification.
     (1) The commissioner must give the reinsurer notice and opportunity for hearing. The
suspension or revocation may not take effect until after the commissioner's order on hearing,
unless:
     (i) The reinsurer waives its right to hearing;
     (ii) The commissioner's order is based on regulatory action by the reinsurer's domiciliary
jurisdiction or the voluntary surrender or termination of the reinsurer's eligibility to transact
insurance or reinsurance business in its domiciliary jurisdiction or in the primary certifying state
of the reinsurer under subparagraph (f)(vi) of this section; or
     (iii) The commissioner finds that an emergency requires immediate action and a court of
competent jurisdiction has not stayed the commissioner's action.
     (A) While a reinsurer's accreditation or certification is suspended, no reinsurance contract
issued or renewed after the effective date of the suspension qualifies for credit except to the
extent that the reinsurer's obligations under the contract are secured in accordance with Section 3.
If a reinsurer's accreditation or certification is revoked, no credit for reinsurance may be granted
after the effective date of the revocation except to the extent that the reinsurer's obligations under
the contract are secured in accordance with subsection (f)(v) or section 3.
     (k) Concentration Risk.
     (1) A ceding insurer shall take steps to manage its reinsurance recoverables proportionate
to its own book of business. A domestic ceding insurer shall notify the commissioner within
thirty (30) days after reinsurance recoverables from any single assuming insurer, or group of
affiliated assuming insurers, exceeds fifty percent (50%) of the domestic ceding insurer's last
reported surplus to policyholders, or after it is determined that reinsurance recoverables from any
single assuming insurer, or group of affiliated assuming insurers, is likely to exceed this limit.
The notification shall demonstrate that the exposure is safely managed by the domestic ceding
insurer.
     (2) A ceding insurer shall take steps to diversify its reinsurance program. A domestic
ceding insurer shall notify the commissioner within thirty (30) days after ceding to any single
assuming insurer, or group of affiliated assuming insurers, more than twenty percent (20%) of the
ceding insurer's gross written premium in the prior calendar year, or after it has determined that
the reinsurance ceded to any single assuming insurer, or group of affiliated assuming insurers, is
likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed
by the domestic ceding insurer.
     27-1.1-2. Asset or reduction from liability for reinsurance ceded by a domestic
insurer to an assuming insurer not meeting the requirements of 27-1.1-1.
     An asset or a reduction from liability for the reinsurance ceded by a domestic insurer to
an assuming insurer not meeting the requirements of § 27-1.1-1 shall be allowed in an amount not
exceeding the liabilities carried by the ceding insurer; provided, further, that the commissioner
may adopt by regulation pursuant to §27-1.1-4 specific additional requirements relating to or
setting forth:
     (1) The valuation of assets or reserve credits;
     (2) The amount and forms of security supporting reinsurance arrangements described in
§27-1.1-4; and
     (3) The circumstances pursuant to which credit will be reduced or eliminated.
     The reduction shall be in the amount of funds held by or on behalf of the ceding insurer,
including funds held in trust for the ceding insurer, under a reinsurance contract with the
assuming insurer as security for the payment of obligations thereunder, if the security is held in
the United States subject to withdrawal solely by, and under the exclusive control of, the ceding
insurer, or, in the case of a trust, held in a qualified United States financial institution as defined
in § 27-1.1-3(b). This security may be in the form of:
     (1) Cash;
     (2) Securities listed by the securities valuation office of the National Association of
Insurance Commissioners, including those deemed exempt from filing as defined by the Purposes
and Procedures Manual of the Securities Valuation Office, and qualifying as admitted assets;
     (3) (i) Clean, irrevocable, unconditional letters of credit, issued or confirmed by a
qualified United States financial institution as defined in § 27-1.1-3(a), no later than December
31st of the year for which the filing is being made, and in the possession of, or in trust for, the
ceding insurer on or before the filing date of its annual statement.
     (ii) Letters of credit meeting applicable standards of issuer acceptability as of the dates of
their issuance or confirmation shall, notwithstanding the issuing or confirming institution's
subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable
as security until their expiration, extension, renewal, modification, or amendment, whichever first
occurs; or
     (4) Any other form of security acceptable to the commissioner.
     27-1.1-4. Rules and regulations.
     (a) The commissioner may adopt reasonable rules and regulations implementing the
provisions of this law.
     (b) The commissioner is further authorized to adopt rules and regulations applicable to
reinsurance arrangements described in subsection (b)(1) below of this section.
     (1) A regulation adopted pursuant to this subsection may apply only to reinsurance
relating to:
     (i) Life insurance policies with guaranteed nonlevel gross premiums or guaranteed
nonlevel benefits;
     (ii) Universal life insurance policies with provisions resulting in the ability of a
policyholder to keep a policy in force over a secondary guarantee period;
     (iii) Variable annuities with guaranteed death or living benefits;
     (iv) Long-term-insurance care insurance policies; or
     (v) Other life and health insurance and annuity products as to which the NAIC adopts
model regulatory requirements with respect to credit for reinsurance.
     (2) A regulation adopted pursuant to subsection (b)(1)(i) or (b)(1)(ii) of this section, may
apply to any treaty containing:
     (i) Policies issued on or after January 1, 2015; and
     (ii) Policies issued prior to January 1, 2015, if risk pertaining to the pre-2015 policies is
ceded in connection with the treaty, in whole or in part, on or after January 1, 2015.
     (3) A regulation adopted pursuant to §27-1.1-4(b) subsection (b) of this section may
require the ceding insurer, in calculating the amounts or forms of security required to be held
under regulations promulgated under this authority, to use the Valuation Manual adopted by the
NAIC under Section 11B(1) of the NAIC Standard Valuation Law, including all amendments
adopted by the NAIC and in effect on the date as which the calculation is made, to the extent
applicable.
     (4) A regulation adopted pursuant to §27-1.1-4(b) subsection (b) of this section shall not
apply to cessions to an assuming insurer that:
     (i) Is certified in this state; or
     (ii) Maintains at least two hundred fifty million dollars ($250,000,000) in capital and
surplus when determined in accordance with the NAIC Accounting Practices and Procedures
Manual, including all amendments thereto adopted by the NAIC, excluding the impact of any
permitted or prescribed practices; and is:
     (A) Licensed in at least twenty-six (26) states; or
     (B) Licensed in at least ten (10) states, and licensed or accredited in a total of at least
thirty-five (35) states.
     (5) The authority to adopt regulations pursuant to §27-1.1-4(b) subsection (b) of this
section does not limit the commissioner's general authority to adopt regulations pursuant to §27-
1.1-4(a) subsection (a) of this section.
     SECTION 2. Section 27-64-6 of the General Laws in Chapter 27-64 entitled "The
Protected Cell Companies Act" is hereby amended to read as follows:
     27-64-6. Reach of creditors and other claimants.
     (a) (1) Protected cell assets shall only be available to the creditors of the protected cell
company that are creditors in respect to that protected cell and shall be entitled, in conformity
with the provisions of this chapter, to have recourse to the protected cell assets attributable to that
protected cell, and shall be absolutely protected from the creditors of the protected cell company
that are not creditors in respect of that protected cell and, who accordingly, shall not be entitled to
have recourse to the protected cell assets attributable to that protected cell. Creditors with respect
to a protected cell shall not be entitled to have recourse against the protected cell assets of other
protected cells or the assets of the protected cell company's general account.
     (2) Protected cell assets shall only be available to creditors of a protected cell company
after all protected cell liabilities have been extinguished or provided for in accordance with the
plan of operation relating to that protected cell.
     (b) When an obligation of a protected cell company to a person arises from a transaction,
or is imposed, in respect of a protected cell: (1) tThat obligation of the protected cell company
shall extend only to the protected cell assets attributable to that protected cell, and the person
shall, with respect to that obligation, be entitled to have recourse only to the protected cell assets
attributable to that protected cell,; and (2) tThat obligation of the company shall not extend to the
protected cell assets of any other protected cell or the assets of the protected cell company's
general account, and that person shall not, with respect to that obligation, be entitled to have
recourse to the protected cell assets of any other protected cell or the assets of the protected cell
company's general account.
     (c) When an obligation of a protected cell company relates solely to the general account,
the obligation of the protected cell company shall extend only to, and that creditor shall, with
respect to that obligation, be entitled to have recourse only to the assets of the protected cell
company's general account.
     (d) Other than with regard to the application of §27-64-6 this section, the The activities,
assets, and obligations relating to a protected cell are not subject to the provisions of chapters 34,
34.1, and 34.3 of this title and neither a protected cell nor a protected cell company shall be
assessed by or be required to contribute to any guaranty fund or guaranty association in this state
with respect to the activities, assets or obligations of a protected cell. Nothing in this section shall
affect the activities or obligations of an insurer's general account.
     (e) In no event shall the establishment of one or more protected cells alone constitute or
be deemed to be a fraudulent conveyance,; an intent by the protected cell company to defraud
creditors; or the carrying out of business by the protected cell company for any other fraudulent
purpose.
     SECTION 3. Section 44-17-1 of the General Laws in Chapter 44-17 entitled "Taxation of
Insurance Companies" is hereby amended to read as follows:
     44-17-1. Companies required to file -- Payment of tax -- Retaliatory rates.
     (a) Every domestic, foreign, or alien insurance company, mutual association,
organization, or other insurer, including any health maintenance organization as defined in § 27-
41-2, any medical malpractice insurance joint underwriters association as defined in § 42-14.1-1,
any nonprofit dental service corporation as defined in § 27-20.1-2 and any nonprofit hospital or
medical service corporation as defined in chapters 19 and 20 of title 27, except companies
mentioned in § 44-17-6 and organizations defined in § 27-25-1, transacting business in this state,
shall, on or before April 15 in each year, file with the tax administrator, in the form that he or she
may prescribe, a return under oath or affirmation signed by a duly authorized officer or agent of
the company, containing information that may be deemed necessary for the determination of the
tax imposed by this chapter, and shall at the same time pay an annual tax to the tax administrator
of two percent (2%) of the gross premiums on contracts of insurance, except for ocean marine
insurance as referred to in § 44-17-6, covering property and risks within the state, written during
the calendar year ending December 31st next preceding.
     (b) Qualifying insurers for purposes of this subsection section means every domestic,
foreign, or alien insurance company, mutual association, organization, or other insurer and
excludes:
     (1) Health maintenance organizations, as defined in § 27-41-2;
     (2) Nonprofit dental service corporations, as defined in § 27-20.1-2; and
     (3) Nonprofit hospital or medical service corporations, as defined in §§ 27-19-1 and 27-
20-1.
     (c) For tax years 2018 and thereafter, the rate of taxation may be reduced as set forth
below and, if so reduced, shall be fully applicable to qualifying insurers instead of the two percent
(2%) rate listed in subsection (a). In the case of foreign or alien companies, except as provided in
§ 27-2-17(d), the tax shall not be less in amount than is imposed by the laws of the state or
country under which the companies are organized upon like companies incorporated in this state
or upon its agents, if doing business to the same extent in the state or country. The tax rate shall
not be reduced for gross premiums written on contracts of health insurance as defined in § 42-14-
5(c) but shall remain at two percent (2%) or the appropriate retaliatory tax rate, whichever is
higher.
     (d) For qualifying insurers, the premium tax rate may be decreased based upon Rhode
Island jobs added by the industry as detailed below:
     (1) A committee shall be established for the purpose of implementing tax rates using the
framework established herein. The committee shall be comprised of the following persons or their
designees: the secretary of commerce, the director of the department of business regulation, the
director of the department of revenue, and the director of the office of management and budget.
No rule may be issued pursuant to this section without the prior, unanimous approval of the
committee.;
     (2) On the timetable listed below, the committee shall determine whether qualifying
insurers have added new qualifying jobs in this state in the preceding calendar year. A qualifying
job for purposes of this section is one in which a person is employed for consideration for at least
thirty-five (35) hours a week earning no less than the median hourly wage as reported by the
United States Bureau of Labor Statistics for the state of Rhode Island any employee with total
annual wages equal to or greater than forty percent (40%) of the average annual wages of the
Rhode Island insurance industry, as published by the annual employment and wages report of the
Rhode Island department of labor and training, in NAICS code 5241.;
     (3) If the committee determines that there has been a sufficient net increase in qualifying
jobs in the preceding calendar year(s) to offset a material reduction in the premium tax, it shall
calculate a reduced premium tax rate. Such rate shall be determined via a method selected by the
committee and designed such that the estimated personal income tax generated by the increase in
qualifying jobs is at least one hundred and twenty-five percent (125%) of the anticipated
reduction in premium tax receipts resulting from the new rate. For purposes of this calculation,
the committee may consider personal income tax withholdings or receipts, but in no event may
the committee include for the purposes of determining revenue neutrality income taxes that are
subject to segregation pursuant to § 44-48.3-8(f) or that are otherwise available to the general
fund.;
     (4) Any reduced rate established pursuant to this section must be established in a
rulemaking proceeding pursuant to chapter 35 of title 42, subject to the following conditions:
     (i) Any net increase in qualifying jobs and the resultant premium tax reduction and
revenue impact shall be determined in any rulemaking proceeding conducted under this section
and shall be set forth in a report included in the rulemaking record, which report shall also include
a description of the data sources and calculation methods used. The first such report shall also
include a calculation of the baseline level of employment of qualifying insurers for the calendar
year 2015.; and
     (ii) Notwithstanding any provision of the law to the contrary, no rule changing the tax
rate shall take effect until one hundred and twenty (120) days after notice of the rate change is
provided to the speaker of the house, the president of the senate, the house and senate fiscal
advisors, and the auditor general, which notice shall include the report required under the
preceding provision.
     (5) For each of the first three (3) rulemaking proceedings required under this section, the
tax rate may remain unchanged or be decreased consistent with the requirements of this section,
but may not be increased. These first three (3) rulemaking proceedings shall be conducted by the
division of taxation and occur in the following manner:
     (i) The first rulemaking proceeding shall take place in calendar year 2017. This
proceeding shall establish a rule that sets forth: (A) A new premium tax rate, if allowed under the
requirements of this section, which rate shall take effect in 2018, and (B) A method for
calculating the number of jobs at qualifying insurers.;
     (ii) The second rulemaking proceeding shall take place in calendar year 2018. This
proceeding shall establish a rule that sets forth: (A) A new premium tax rate, if allowed under the
requirements of this section, which rate shall take effect in 2019, and (B) The changes, if any, to
the method for calculating the number of jobs at qualifying insurers.; and
     (iii) The third rulemaking proceeding shall take place in calendar year 2019. This
proceeding shall establish a rule that sets forth: (A) A new premium tax rate, if allowed under the
requirements of this section, which rate shall take effect in 2020, and (B) The changes, if any, to
the method for calculating the number of jobs at qualifying insurers.
     (6) The tax rate established in the regulation following regulatory proceedings that take
place in 2019 shall remain in effect through and including 2023. In calendar year 2023, the
department of business regulation will conduct a rulemaking proceeding and issue a rule that sets
forth: (A) A new premium tax rate, if allowed under the requirements of this section, which rate
shall take effect in 2024, and (B) The changes, if any, to the method for calculating the number of
jobs at qualifying insurers. A rule issued by the department of business regulation may decrease
the tax rate if the requirements for a rate reduction contained in this section are met, or it may
increase the tax rate to the extent necessary to achieve the overall revenue level sought when the
then-existing tax rate was established. Any rate established shall be no lower than one percent
(1%) and no higher than two percent (2%). This proceeding shall be repeated every three (3)
calendar years thereafter, however, the base for determination of job increases or decreases shall
remain the number of jobs existing during calendar year 2022.;
     (7) No reduction in the premium tax rate pursuant to this section shall be allowed absent a
determination that qualifying insurers have added in this state at least three hundred fifty (350)
new, full-time, qualifying jobs above the baseline level of employment of qualifying insurers for
the calendar year 2015.;
     (8) Notwithstanding any provision of this section to the contrary, the premium tax rate
shall never be set lower than one percent (1%).;
     (9) The division of taxation may adopt implementation guidelines, directives, criteria,
rules and regulations pursuant to chapter 35 of title 42 as are necessary to implement this section.;
and
     (10) The calculation of revenue impacts under this section is at the sole discretion of the
committee established under subsection (d)(1). Notwithstanding any provision of law to the
contrary, any administrative action or rule setting a tax rate pursuant to this section or failing or
declining to alter a tax rate pursuant to this section shall not be subject to judicial review under
chapter 35 of title 42.
     SECTION 4. This act shall take effect upon passage.
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LC002929
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