Subscribe to receive our Floor Reports covering all the action on the Texas House and Senate floor!
Relating to credit to certain ceding insurers for reinsurance ceded to certain assuming insurers.
No significant fiscal implication to the State is anticipated.
SB 1093 would remove provisions of the Insurance Code that prohibit security funds for reinsurance obligations from maturing past one-year. This would apply to reinsurance for insurers of property, casualty, life, health, and accident insurance.
However, this bill would require these security funds to be listed and approved by the National Association of Insurance Commissioners (NAIC).
Reinsurance helps to spread the potential catastrophic losses an insurer may incur. An insurer will offload part of its liability to other entities called reinsurers. That is why reinsurance is also known as “insurance for insurers.” Reinsurance helps smaller insurance carriers carry more liability from the policies they underwrite.
However, current laws in Texas place limitations on the investment options of a reinsurer that is not based in Texas. Currently, these types of reinsurers are prevented from allowing an insurer’s investments from maturing past one-year, this means that the insurer and its reinsurer are not receiving the most favorable returns on investment. Limitations such as this put Texas at a competitive disadvantage when it comes to enticing reinsurers to do business in our state.
SB 1093 would open up more investment options for insurers in Texas because it would remove restrictions on reinsurers who are not based in our state.
We stand neutral on SB 1093. While it may expand selections for insurers based in Texas by allowing them more latitude in the investment options with reinsurers outside of our state, we cannot determine—without more information—whether the impact of this will be as effective given the heavy regulatory burden that is already placed on reinsurers not domiciled in our state.