SF 2104 – Regulation of insurance holding companies
SF 2105 – Insurance omnibus
SF 2131 – Principle-based Reserves
SF 2132 – IUB non-substantive omnibus
SF 2133 – Federal Home Loan Bank rights
SF 2183 – Excess reserves of health insurance companies
SF 2205 – Credit Union omnibus
SF 2255 – Architects, professional engineers’ voluntary assistance to State
SF 2283 – Escheatment of abandoned U.S. saving bonds
HF 2130 – Banking omnibus
HF 2131 – Filing of mortgage or deed by transmitting utility
FLOOR ACTION:
SF 2104 is a recommendation by the Iowa Insurance Division (IID). A similar version was introduced last year but withdrawn after a lack of consensus among stakeholders. The IID must examine holding companies for compliance and solvency assessments, and legislative action was requested because the increasing complexities of holding companies and their subsidiaries make it hard for Iowa regulators to track all assets and liabilities. Over the interim, the IID worked with carriers and found common ground. The bill modifies the existing Holding Company Chapter in Iowa Code, primarily by establishing a supervisory college of regulation, under the control of the home state, and by requiring an enterprise risk report so that not just the examined company—but also the upstream, downstream and parallel entities under that holding company—are subject to examination and assessment. Companies are required to self-disclose at-risk elements of the holding company. This is now going to be a National Association of Insurance Commissioners accreditation standard. Failing to meet this test would put Iowa insurers in jeopardy in their national operations. [2/24: 49-0 (Ernst absent)]
SF 2105 is a recommendation by the Iowa Insurance Division (IID). The bill:
• Changes the status of the Division’s two law enforcement officers certified by the Iowa Law Enforcement Academy (insurance fraud investigators) to the “Protection Classification” of the state retirement system applicable to other similar law enforcement personnel in state government.
• Extends the “look-back” period that the IID can use for disciplinary actions against licensed sellers of securities from one to two years, consistent with FINRA (Financial Industry Regulatory Authority) standards.
• Sets parameters regarding the percentage amount of required legal reserve of a company that can be in securities.
• Allows hedging transactions other than those defined as highly effective hedging transactions to be held as part of a company’s legal reserve but limits the extent of that allowance.
The bill also includes new Code language that allows the electronic posting and delivery of insurance policies and forms at the option of customers. This parallels changes that have occurred or are occurring in other states. The new sections allow the electronic delivery of insurance notices and documents, provide definitions, set parameters for the use of the method of delivery, and make the use of this process optional under the control of the customer. Similarly, it allows for the posting of insurance notices and documents, provides definitions, sets parameters and makes the use of this process optional under the control of the customer. It applies these changes to most types of insurance lines so that companies may offer this customer opt-in method of posting and delivery. [2/24: 49-0 (Ernst absent)]
SF 2131 is a recommendation by the Iowa Insurance Division dealing with principle-based reserving (PBR) for life insurance policies and efforts nationwide to develop a formula that allows for flexibility. PBR seeks to “right-size” the reserves to be held in the future, based on a Standard Valuation Manual developed by the National Association of Insurance Commissioners (NAIC). Some insurance companies will be required to hold a higher minimum level of reserves, while others will have a lower minimum established, depending on the nature of their product guarantees and risk. In this legislation, the changes to the NAIC’s Standard Valuation Model and adoption of the Non-Forfeiture Model will collectively implement PBR.
The net impact of these two models is to change the standard to be met for the reserves to be held by the life insurance companies regulated by the Division under Iowa Code Chapter 508. Currently, a formulaic and static approach is used in Iowa. PBR allows the use of more advanced methodologies to better reflect and measure the risks of new, innovative life insurance products. This law will not go into effect until 42 states representing 75 percent of the business have adopted the PBR model, with an additional three-year transition period before compliance is required. So far, 11 states have adopted PBR and others have proposals in process. [2/24: 49-0 (Ernst absent)]
SF 2132 is a recommendation by the Iowa Utilities Board (IUB) that removes obsolete telecommunications statutes but does not modify the current regulatory requirements. Examples of obsolete language now in Iowa Code are a report that was delivered to the Legislature in 2005; 1995 rule-making provisions that have long been completed; and filing requirements for local exchange carriers enacted in 1995 then superseded by federal law in 1996. The IUB conducted an extensive Notice of Inquiry process over the past year so that the public and industry stakeholders had many opportunities to review and comment on the draft proposal. Fifteen companies, organizations and the Iowa Consumer Advocate filed a total of 31 comments and suggestions prior to the final IUB legislative recommendation. [2/24: 49-0 (Ernst absent)]
SF 2133 relates to the rights of a Federal Home Loan Bank (FHLB) regarding collateral pledged by insurer-members. It includes language that states an FHLB cannot be stayed or prohibited from exercising its rights regarding collateral pledged by insurer-members in delinquency or receivership proceedings, after the seventh day following the filing of a delinquency proceeding. The FHLB system was established by Congress in 1932 to support mortgage lending. The FHLB Des Moines is the largest of the country’s 12 regional banks, with 1,200 insurer-members in Iowa, Minnesota, Missouri, North Dakota and South Dakota. It collaborates with community and commercial banks, credit unions, thrifts, insurance companies and community development financial institutions to provide readily available, low-cost liquidity to local lenders in all economic cycles. FHLBs are governed by the Federal Housing Finance Agency; are cooperatively owned by their members; operate independently with their own boards of directors; and are registered with the Securities and Exchange Commission. [2/25: 49-0 (Feenstra absent)]
SF 2205 is a recommendation by the Credit Union Division of the Iowa Department of Commerce to clarify, strengthen and update Code language. It also establishes new involuntary dissolution provisions relating to state credit unions. Provisions relating to authorization to receive specified payments from other credit unions and relating to the requirement that investments be made in corporate bonds that are considered “investment grade” take effect upon enactment. [2/25: 50-0]
SF 2255 is a new version of legislation approved by the Commerce Committee last year but referred back to the Committee for further discussion. The proposal allows registered architects and licensed professional engineers to be included as employees of the State during the time they volunteer with no compensation upon the request of State public safety officials to provide disaster-related assistance. The volunteers will be part of the Iowa Building Safety Assessment & Failure Evaluation (B-SAFE) Team of the Iowa Homeland Security & Emergency Management Department. [2/26: 49-0 (Ernst absent)]
HF 2130 (SF 2115) is a recommendation by the Banking Division of the Iowa Department of Commerce. It allows banks chartered by other states that have offices in Iowa to use the word “bank,” which reflects modern interstate banking practices. Currently, only Iowa state-chartered or national banks can use the word “bank.” It repeals the minority shareholders discount provision for banks that was changed 12 years ago but has rarely been used. With the repeal, banks that engage in mergers or reverse stock splits would be treated as any other business corporation.
The bill also modifies provisions under the Division’s Professional Licensing Bureau. It streamlines business entity authorization and licensure requirements for the practice of architecture, based on recommendations by the Architectural Examining Board after discussions with various trade associations. The changes maintain the protections for the safety, health and welfare of the public, but place a more focused responsibility on registered architects working on behalf of business entities. The language is similar to that applicable to other professions regulated by the Bureau: engineers, land surveyors, landscape architects and interior designers. The bill passed the House on a 98-0 vote. [2/25: 50-0]
HF 2131 (SF 2093) permits a transmitting utility (generation and transmission rural electric cooperatives) to file a mortgage or deed of trust (a.k.a. an indenture) in a more cost-effective and less cumbersome way. Currently, rural electric cooperatives (RECs) must file in every county where the utility has real property, and the costs can be significant when the documents may range from 100 to more than 200 pages long. The bill allows a transmitting utility to file the indenture document in one county recorder’s office and file a brief memorandum in each of the other counties in which the utility has real property. The bill passed the House on a 98-0 vote. [2/24: 49-0 (Ernst absent)]
COMMITTEE ACTION:
SF 2183 allows the Iowa Insurance Commissioner to identify any insurance company or non-profit health service corporation in Iowa that issues individual or small group health insurance policies or hospital or medical service contracts to determine the necessary financial reserves of the company or corporation to meet its obligations. The Commissioner may order the company or corporation to distribute any excess reserves to its policyholders or contract subscribers. The Committee unanimously approved an amendment to apply the language to all health insurers rather than those that issue more than 80 percent of individual or 60 percent of small group health insurance policies in Iowa. [2/20: 9-6, party-line)]
SF 2283 (SSB 3195) is a recommendation by the State Treasurer to expedite the return of U.S. savings bonds that have matured and are presumed abandoned to the rightful owners or heirs. If a claim for the U.S. savings bonds has not been filed within three years and 180 days after the savings bonds were presumed abandoned under current law, the State Treasurer must begin civil action. This bill streamlines a cumbersome process and puts in place a method that allows the TOS to identify the owners and return the money to them, similar to the State Treasurer’s highly successful “Great Iowa Treasure Hunt.”
The bill provides that if a claim is not filed or no one appears at the hearing to substantiate a claim, or if the court determines that a claimant is not entitled to the property and the court, if satisfied that the State Treasurer has complied with the required process, will enter a judgment that the savings bonds have escheated to the State. The Treasurer will redeem the savings bonds escheated and the proceeds from will be deposited into the General Fund. A person may file a claim for a bond or the bond proceeds escheated to the State and if there is sufficient proof of the validity of the claim, the State Treasurer may pay the claim in accordance with current law. [2/20: short form]