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Relating to credit to
certain ceding insurers for reinsurance ceded to certain assuming insurers.
No significant fiscal implication to the State is anticipated.
HB 1344 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 -- “insurance for insurers,” in other words. Reinsurance helps
smaller insurance carriers carry more liability from the policies they
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 1344 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 HB 1344. 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 and longitudinal data — whether the impact of this will be as effective given the heavy regulatory burden that is already placed on out-of-state reinsurers.