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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.
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.