Legislature(2021 - 2022)

2021-02-18 House Journal

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2021-02-18                     House Journal                      Page 0159
HB 101                                                                                                                        
HOUSE BILL NO. 101 by the House Rules Committee by request of                                                                   
the Governor, entitled:                                                                                                         
     "An Act relating to credit for reinsurance; and providing for an                                                           
     effective date."                                                                                                           
was read the first time and referred to the State Affairs and Labor &                                                           
Commerce Committees.                                                                                                            
The following fiscal note(s) apply:                                                                                             
1.  Zero, Dept. of Commerce, Community, & Economic Development                                                                  
The Governor's transmittal letter dated February 17 follows:                                                                    
"Dear Speaker Stutes:                                                                                                           
Under the authority of Article III, Section 18, of the Alaska                                                                   
Constitution, I am transmitting a bill updating the insurance code to                                                           

2021-02-18                     House Journal                      Page 0160
conform to changes in the credit for reinsurance model law adopted by                                                           
the National Association of Insurance Commissioners (NAIC). This                                                                
will ensure Alaska maintains its accredited status with the NAIC and                                                            
improve nationwide uniformity in the regulation of insurance.                                                                   
Reinsurance is a type of insurance that insurers purchase from other                                                            
insurers to insure themselves, in all or in part, against contracted                                                            
insurance risk. In doing so, insurers distribute risks among themselves.                                                        
Credit for reinsurance is an accounting method that allows reinsurance                                                          
to be treated as an asset.                                                                                                      
This bill allows United States reinsurers easier financial access to                                                            
qualified alien jurisdictions and assists in making the Alaska insurance                                                        
market more competitive by allowing qualified and well-capitalized                                                              
alien insurers to compete in United States’ markets on a more                                                                   
equitable basis. Specifically, the bill makes changes to AS 21.12.020                                                           
Reinsurance Credit Allowed a Domestic Ceding Insurer, to conform                                                                
our state insurance code to recent changes made in NAIC’s                                                                       
reinsurance model law.                                                                                                          
There are potentially severe consequences if the legislation and                                                                
accompanying regulations are not adopted before September 2022.                                                                 
The Federal Office of Insurance (OIC) has negotiated a treaty with the                                                          
European Union guaranteeing that each jurisdiction will enact the                                                               
legislation. States risk significant loss of sovereignty in insurance                                                           
regulation should the OIC begin a formal review and find that a                                                                 
jurisdiction is out of treaty compliance. In that instance, OIC could use                                                       
federal legislation to preempt local laws across all jurisdictions.                                                             
The changes contained in this proposal will ensure that Alaska’s                                                                
insurance market remains competitive and current with national                                                                  
standards and accreditation.                                                                                                    
Mike Dunleavy