Add Notes
ENTITLED, An Act to
revise certain provisions regarding amounts payable under reinsurance
contracts in liquidation proceedings of insurers.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
Section
1.
That
§
58-29B-94
be amended to read as follows:
58-29B-94.
The amount recoverable by the liquidator from reinsurers may not be reduced as a
result of delinquency proceedings, unless the reinsurance contract provides, in substance, that in the
event of the insolvency of the ceding insurer, the reinsurance is payable under a contract reinsured
by the reinsurer on the basis of reported claims allowed in the liquidation proceeding or proof of
payment of the claim by a guaranty association, without diminution because of the insolvency of the
ceding insurer. Such payments shall be made directly to the ceding insurer or to its domiciliary
liquidator unless:
(1) The contract or other written agreement specifically provides another payee of such
reinsurance in the event of the insolvency of the ceding insurer; or
(2) The reinsurer, with the consent of the direct insured, has assumed such policy obligations
of the ceding insurer as direct obligations of the reinsurer to the payees under such
policies and in substitution for the obligations of the ceding insurer to such payees. The
consent of the liquidator is required for any such assumption of policy obligations effected
after an order of liquidation.
Section
2.
That chapter
58-29B
be amended by adding thereto a NEW SECTION to read as
follows:
Notwithstanding
§
58-29B-94, if a life and health insurance guaranty association has made the
election to succeed to the rights and obligations of the insolvent insurer under the contract of
reinsurance, the reinsurer's liability to pay covered reinsured claims continues under the contract of
reinsurance, subject to the payment to the reinsurer of the reinsurance premiums for such coverage.
Payment for such reinsured claims may only be made by the reinsurer pursuant to the direction of
the guaranty association or its designated successor. Any payment made at the direction of the
guaranty association or its designated successor by the reinsurer discharges the reinsurer of any
further liability to any other party for the claim payment.
Section
3.
That
§
58-14-4
be amended to read as follows:
58-14-4.
No credit may be allowed, as an asset or as a deduction from liability, to any ceding
insurer for reinsurance unless the reinsurance contract provides, in substance, that in the event of the
insolvency of the ceding insurer, the reinsurance is payable under a contract reinsured by the
reinsurer on the basis of reported claims allowed in the liquidation proceeding or proof of payment
of the claim by a guaranty association without diminution because of the insolvency of the ceding
insurer. Such payments shall be made directly to the ceding insurer or to its domiciliary liquidator
unless:
(1) The contract or other written agreement specifically provides another payee of such
reinsurance in the event of the insolvency of the ceding insurer; or
(2) The reinsurer, with the consent of the direct insured, has assumed such policy obligations
of the ceding insurer as direct obligations of the reinsurer to the payees under such
policies and in substitution for the obligations of the ceding insurer to such payees. The
consent of the liquidator is required for any such assumption of policy obligations effected
after an order of liquidation.
Section
4.
That chapter
58-14
be amended by adding thereto a NEW SECTION to read as
follows:
Notwithstanding
§
58-14-4, if a life and health insurance guaranty association has made the
election to succeed to the rights and obligations of the insolvent insurer under the contract of
reinsurance, the reinsurer's liability to pay covered reinsured claims continues under the contract of
reinsurance, subject to the payment to the reinsurer of the reinsurance premiums for such coverage.
Payment for such reinsured claims may only be made by the reinsurer pursuant to the direction of
the guaranty association or its designated successor. Any payment made at the direction of the
guaranty association or its designated successor by the reinsurer discharges the reinsurer of any
further liability to any other party for the claim payment.
Section
5.
That chapter
58-14
be amended by adding thereto a NEW SECTION to read as
follows:
The reinsurance agreement may provide that the domiciliary liquidator of an insolvent ceding
insurer shall give written notice to the reinsurer of the pendency of a claim against such ceding
insurer on the contract reinsured within a reasonable time after such claim is filed in the liquidation
proceeding. During the pendency of such claim, any reinsurer may investigate such claim and
interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defenses
that it deems available to the ceding insurer or its liquidator. Such expense may be filed as a claim
against the insolvent ceding insurer as a Class 6 claim pursuant to
§
58-29B-124 to the extent of a
proportionate share of the benefit that may accrue to the ceding insurer solely as result of the defense
undertaken by the reinsurer. If two or more reinsurers are involved in the same claim and a majority
in interest elect to interpose a defense to such claim, the expense shall be apportioned in accordance
with the terms of the reinsurance agreement as though such expense had been incurred by the ceding
insurer.
An Act to revise certain provisions regarding amounts payable under reinsurance contracts in
liquidation proceedings of insurers.
=========================
I certify that the attached
Act
originated in the
HOUSE as
Bill
No.
1188
____________________________
Chief Clerk
=========================
____________________________
Speaker of the House
____________________________
Chief Clerk
____________________________
President of the Senate
____________________________
Secretary of the Senate
House
Bill
No.
1188
File No. ____
Chapter No. ______
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Received at this Executive Office
this _____ day of _____________ ,
20____ at ____________ M.
By _________________________
for the Governor
=========================
The attached Act is hereby
approved this ________ day of
______________ , A.D., 20___
____________________________
Governor
=========================
STATE OF SOUTH DAKOTA,
ss.
Office of the Secretary of State
Filed ____________ , 20___
at _________ o'clock __ M.
____________________________
Secretary of State
By _________________________
Asst. Secretary of State
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