COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 1282-05
Bill No.: Perfected SCS for SB 344
Subject: Insurance Department; Credit and Bankruptcy
Type: Original
Date: February 27, 2001
FISCAL SUMMARY
| FUND AFFECTED | FY 2002 | FY 2003 | FY 2004 |
| None | |||
| Total Estimated
Net Effect on All State Funds |
$0 | $0 | $0 |
| FUND AFFECTED | FY 2002 | FY 2003 | FY 2004 |
| None | |||
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
| FUND AFFECTED | FY 2002 | FY 2003 | FY 2004 |
| Local Government | $0 | $0 | $0 |
Numbers within parentheses: ( ) indicate costs or losses.
This fiscal note contains 3 pages.
ASSUMPTION
Officials from the Department of Insurance (INS) assume this proposal would not fiscally impact their agency. However, if receiverships may not use claims estimations to compel payment from reinsurers, the affect may be to defer the receipt of certain premium tax revenues. Losses from insolvent insurance companies are funded by the state guaranty associations. The guaranty associations must assess other, solvent insurers in order to fund the losses from insolvent insurance companies. Insurance companies are allowed a tax credit against their premium tax liability for assessments paid to the guaranty associations. INS officials assume a delay in the collection of reinsurance proceeds could cause more losses to be funded by the guaranty associations, which will then wait for the reimbursement, by the receiver from eventual collection of reinsurance. This delay would in turn cause a temporary increase in credits against premium tax, which would later be returned to the treasury when the reinsurance collections are credited to the guaranty association. The end result would be a deferral of state revenue.
Oversight assumes the removal of the sunset provision for claims estimations in receivership proceedings would result in no fiscal impact in the years involved with this fiscal note. However, the repeal of this sunset clause would cause a delay in the collection of reinsurance possibly causing an unknown fiscal impact on future years beyond FY2005.
| FISCAL IMPACT - State Government | FY 2002 | FY 2003 | FY 2004 |
| $0 | $0 | $0 | |
| FISCAL IMPACT - Local Government | FY 2002 | FY 2003 | FY 2004 |
| $0 | $0 | $0 |
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.
DESCRIPTION
This proposal would repeal and reenact section 375.1220. This section would allow the estimation of contingent liabilities for the purpose of fixing a creditor's claim in a liquidation estate. The proposal would also allow the liquidator to negotiate a voluntary commutation or release of all obligations arising from reinsurance contracts. The estimation of contingent liabilities provided by subsection three would not apply to formal delinquency proceedings in which, prior to August 28, 1999, the court issued any decree applying the provisions of this section. The estimation of contingent liabilities provided by subsection three would terminate on December 31, 2005. This proposal has an emergency clause.
This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.
SOURCES OF INFORMATION
Department of Insurance
Jeanne Jarrett, CPA
Director
February 27, 2001