PA 17-59—sSB 809

Insurance and Real Estate Committee


SUMMARY: This act authorizes the insurance commissioner to adopt regulations under which a domestic insurer may count reinsurance as a credit (for an asset) or reduction (for a liability) on certain financial statements, including annual reports to the commissioner. Except under limited circumstances (see below), prior law prohibited such insurers from doing so if they did not meet one of six sets of statutory criteria.

The act also changes the circumstances under which a stock or mutual insurer may exclude reinsurance in risk exposure calculations. It does so by (1) eliminating the prohibition on insurers including the risk held by reinsurers not authorized to do business in Connecticut and (2) allowing insurers to include the risk held by reinsurers that meet requirements set in law or in regulations adopted under the act.

Reinsurance is a transaction in which an insurance company transfers a portion of risk (the ceding insurer) to another insurance company (the reinsurer) so that a large loss does not fall on any one company.

EFFECTIVE DATE: October 1, 2017


Prior law allowed an insurer to count reinsurance as a credit for an asset or a reduction for a liability if the reinsurer met one of six sets of statutory requirements pertaining to minimum surplus, licensing, filing, and examinations. The act allows the commissioner to create an additional set of requirements in regulations relating to the valuation of assets or reserve credits and the circumstances in which credit can be reduced or eliminated. The regulations may also determine the amounts and forms of security supporting reinsurance agreements relating to the following:

1. life insurance policies with guaranteed nonlevel gross premiums or guaranteed nonlevel benefits;

2. universal life policies that permit a policyholder to keep the policy in force over a secondary guarantee period;

3. variable annuities with guaranteed death or living benefits;

4. long-term care policies; or

5. any other life insurance, health insurance, or annuity products for which the National Association of Insurance Commissioners (NAIC) adopts credit or reinsurance requirements.

Under the act, the criteria pertaining to life insurance policies may apply to reinsurance agreements that include insurance policies issued on or after January 1, 2015. For policies issued before January 1, 2015, the regulations may apply only if the insurer is ceding all or part of the risk in connection with a reinsurance agreement made on or after January 1, 2015.

Additionally, the regulations may require the ceding insurer to calculate the forms and amounts of security supporting reinsurance agreements according to the NAIC Valuation Manual, to the extent applicable.

However, the act prohibits regulations from applying to risk ceded to (1) a certified reinsurer or (2) an assuming reinsurer that (a) maintains at least $250 million in capital and surplus, determined in accordance with the NAIC Accounting Practices and Procedures Manual, and (b) is licensed in at least 26 states or is licensed in at least 10 states and licensed or accredited in a total of at least 35 states.

Additional Regulatory Requirements for Insurers Not Meeting Statutory or Regulatory Criteria

Prior law allowed an insurer to claim credits for assets and reductions for liabilities ceded to a reinsurer that did not meet any of the six statutory criteria described above based on an insurer's liabilities and the security held for the insurer under a reinsurance contract.

Under the act, these insurers may claim credits for assets and reductions for liabilities under these circumstances only if the risk is ceded to a reinsurer that does not meet any of the seven criteria described above (i.e., the six statutory criteria and the set of criteria the commissioner may adopt in regulation under the act). However, the act also allows the commissioner to adopt additional regulatory criteria for these insurers as long as the criteria are consistent with the other regulatory criteria she may adopt under the act.


By law, a stock or mutual insurer may not expose itself to loss on any one risk greater than 10% of its paid-up capital. Prior law allowed the insurer to exclude risk insured by a Connecticut-licensed reinsurer from the amount of risk subject to the 10% limit. The act eliminates this exemption and instead allows such insurers to exclude, when calculating this risk exposure, any risk reinsured by a reinsurer that meets either the (1) statutory requirements for reinsurance credits or (2) any regulations for reinsurance credits adopted under the act.