Permits mortgage guaranty insurers to obtain credit for reinsurance in a manner conforming to the requirements prescribed by the superintendent of insurance

Title of bill

An act to amend the insurance law, in relation to mortgage guaranty insurance and reinsurance

Purpose

To permit mortgage guaranty insurers to obtain credit for reinsurance in a manner conforming to the requirements prescribed by the Superintendent of Insurance with respect to other insurers.

Summary of provisions

Section 1 of the bill amends Section 6507(d) of the Insurance Law to establish guidelines for a mortgage guaranty insurer to receive credit for reinsurance under certain circumstances. Under the bill, where a mortgage guaranty insurer cedes insurance to another mortgage guaranty insurer not licensed under New York law, or to an insurer that insures or reinsures other lines of insurance in addition to mortgage guaranty insurance, the ceding insurer can receive credit for such reinsurance as an asset or as a reduction from liabilities where the assuming insurer establishes and maintains in a segregated trust assets equal to or greater than the assets found in the mortgage guaranty insurer's contingency reserve, or four percent of the outstanding total liability under the aggregate insurance policies assumed from the mortgage guaranty insurer. To the extent the assuming insurer (reinsurer) does not establish such a segregated trust, the mortgage guaranty insurer must establish and maintain the required contingency reserve and policyholders surplus sufficient to support the liability at issue.

Section 1 also requires that any segregated trust established, except as otherwise required by the Superintendent of Insurance, must comply with the requirements for a trust agreement generally applicable to obtain credit for reinsurance ceded to an unauthorized reinsurer involving property and casualty risks.

Finally, Section 1 requires the assuming insurer and the terms of any reinsurance to comply with other requirements prescribed by the Superintendent of Insurance.

Section 2 of the bill provides for an immediate effective date.

Justification

Currently, New York law contains many unnecessary procedural requirements with respect to obtaining credit for reinsurance ceded, placing a regulatory burden on the New York State Insurance Department and mortgage guaranty insurance companies alike. This bill amends Insurance Law Section 6507( d) to render credit for reinsurance requirements for mortgage guaranty insurers consistent with credit for reinsurance requirements for other insurance companies, and within prudent boundaries customarily associated with mortgage guaranty reinsurance practices.

Legislative history

S.7316-B (2008).

Fiscal implications

None.

Effective date

This act shall take effect immediately.