House Engrossed Senate Bill
State of Arizona
First Regular Session
SENATE BILL 1016
amending section 20-261, Arizona Revised Statutes; relating to reinsurance.
1 Be it enacted by the Legislature of the State of Arizona:
2 Section|1.||Section 20-261, Arizona Revised Statutes, is amended to
4 20-261.||Authorized reinsurance
5 A.||An insurer shall reinsure its risks, or any part thereof of its
6 risks, only in solvent insurers having surplus to policyholders not less in
7 amount than the minimum required capital stock required under this title of
8 a domestic stock insurer, other than a limited stock insurer or a domestic
9 life and disability reinsurer, authorized to transact like kinds of
10 insurance. A domestic limited stock life insurer or domestic life and
11 disability reinsurer may accept reinsurance of the risks of other such
12 limited stock insurers and of domestic benefit insurers or domestic life and
13 disability reinsurers.
14 B.||An insurer shall so may reinsure in such alien insurers only as
15 either if the alien insurers are authorized to transact insurance in at least
16 one state of the United States or have in the United States a duly authorized
17 attorney-in-fact to accept service of legal process against the insurer as
18 to any liability which that might arise on account of such reinsurance.
19 C.||No A credit shall not be allowed, as an admitted asset or as a
20 deduction from liability, to any ceding insurer for reinsurance unless the
21 reinsurance is payable by the assuming insurer reinsurer on the basis of the
22 liability of the ceding insurer under the contracts reinsured without
23 diminution because of the insolvency of the ceding insurer nor unless under
24 the reinsurance contract the liability for such reinsurance is assumed by the
25 assuming insurer or insurers the reinsurer assumes the liability for the
1 reinsurance as of the same effective date. The reinsurer shall make payment
2 directly to the ceding insurer or to its statutory successor by whatever name
3 called for the purpose of liquidating or rehabilitating the business of the
4 insurer unless either the reinsurance contract or the policies reinsured
5 required the reinsurer to make payment to the payees under the policies
6 reinsured in the event the ceding insurer becomes insolvent, or the reinsurer
7 with the consent of the direct insured assumes the policy obligations of the
8 ceding insurer to the payees under the policies reinsured in substitution for
9 the obligations of the ceding insurer to those payees.
10 D.||A domestic insurer shall not be a party to any agreement of
11 reinsurance with an unauthorized insurer until such the agreement is filed
12 with and approved in writing by the director. The director shall approve any
13 such the agreement within a reasonable time after filing unless in his the
14 director’s opinion the effect thereof of the agreement would be to reduce
15 protection or service substantially either to policyholders resident of
16 Arizona this state or to policyholders anywhere of the domestic insurer. If
17 the director does not approve the agreement, he the director shall so notify
18 the domestic insurer in writing specifying his the reasons therefor for not
19 approving the agreement.
20 E.||This section shall does not apply to insurance of ocean marine
21 risks or marine protection and indemnity risks.
22 F.||Unless the director requires the assuming insurer to file
23 assumption reinsurance contracts, assumption reinsurance contracts are exempt
24 from the filing requirements prescribed in subsection D if the assuming
25 insurer has a surplus as to policyholders of at least fifty million dollars
26 as shown in the most recent financial statement that is filed by the insurer
27 with the department.
28 Sec.|2.||Joint legislative study committee on captive insurance;
29 members; duties; report
30 A.||The joint legislative study committee on captive insurance is
31 established consisting of the following members:
32 1.||Three members of the house of representatives who are appointed by
33 the speaker of the house of representatives, not more than two of whom
34 represent the same political party.
35 2.||Three members of the senate who are appointed by the president of
36 the senate, not more than two of whom represent the same political party.
37 3.||The director of the department of insurance or the director’s
39 4.||One member who represents the captive insurance industry who is
40 appointed by the speaker of the house of representatives.
41 5.||One member who represents the captive insurance industry who is
42 appointed by the president of the senate.
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1 B.||Committee members are not eligible to receive compensation, but
2 members appointed pursuant to subsection A, paragraphs 4 and 5 of this
3 section are eligible for reimbursement of expenses under title 38, chapter
4 4, article 2, Arizona Revised Statutes.
5 C.||The committee shall:
6 1.||Conduct at least two public hearings.
7 2.||Review and analyze:
8 (a)||Current statutes, rules and legislation in other states and
9 countries relating to captive insurance companies.
10 (b)||The feasibility and economic impact to this state of allowing the
11 establishment of captive insurance companies in this state.
12 (c)||The economic impact in the states and countries that have
13 encouraged the establishment of captive insurance companies.
14 (d)||The role of state regulation in the captive insurance market.
15 (e)||The reasons for forming a captive insurance company and the
16 various types of company structures that a captive insurance company may
17 adopt, including the types of coverage that a captive insurance company may
19 (f)||Factors relating to forming a captive insurance company,
21 (i)||Capitalization requirements.
22 (ii)||Assessments and costs.
23 (iii)||Access to reinsurance.
24 (iv)||Investment limitations.
25 (v)||State and federal tax implications.
26 3.||Submit a report regarding the committee’s analyses and findings and
27 recommendations for legislative action, if any, on or before November 15 to
28 the speaker of the house of representatives, the president of the senate and
29 the governor. The committee shall submit a copy of the report to the
30 secretary of state and the director of the department of library, archives
31 and public records.
32 Sec.|3.||Delayed repeal
33 Section 2 of this act is repealed from and after December 31, 1999.
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