Amendments to title 31, United States Code

Section 313 of title 31, United States Code, is amended— (1)in subsection (b)— (A)by striking The Office and inserting the following:

(1)

Leadership

The Office

; and

(B)by adding at the end the following new paragraph:

(2)

Employees

(A)

Number and compensation

The Director shall fix the number of employees of the Office and the compensation of such employees, as necessary to carry out the provisions of this section without regard to chapter 51 or subchapter III of chapter 53 of title 5. (B)

Additional compensation and benefits

Notwithstanding subparagraph (A), the Director may provide additional compensation and benefits if the same type of compensation or benefits are then being provided by any Federal banking agency or, if not then being provided, could be provided by any such agency under applicable provisions of law or regulation. In setting and adjusting the total amount of compensation and benefits for employees of the Office, the Director shall consult, and seek to maintain comparability with, the Federal banking agencies.

;

(2)in subsection (c)(1)— (A)in subparagraph (E), by striking subsection (r) and inserting subsection (s); (B)by redesignating subparagraphs (G) and (H) as subparagraphs (H) and (I), respectively; and (C)by inserting after subparagraph (F) the following new subparagraph:

(G)with respect to the business of reinsurance— (i)to license entities to transact the business of reinsurance as a national reinsurer pursuant to subsection (h)(1); (ii)to revoke, suspend, or restrict a Federal license pursuant to (h)(1)(B); (iii)to coordinate Federal efforts and establish Federal policy on international matters related to reinsurance, including working with international regulatory and standard-setting bodies; (iv)to assist the Secretary in entering into supervisory arrangements authorized under subsection (h); (v)to establish and enforce appropriate standards and requirements governing national reinsurers consistent with criteria in subsection (h)(5); (vi)to determine that any State law, regulation, or action is preempted as being contrary to or inconsistent with the purposes of subsection (h) and this subparagraph; (vii)to assess and collect reasonable fees from authorized foreign reinsurers for reimbursement of costs incurred by the Director related to supervisory arrangements; and (viii)to assess and collect reasonable fees from national reinsurers for the reimbursement of costs incurred by the Director for licensing and examination of national reinsurers;

;

(3)in subsection (f)— (A)in paragraph (1), by striking A State and inserting Except as provided in subsection (h), a State; and (B)in paragraph (2)(B), by inserting after insurance measures, the following: except as provided in subsection (h),; (4)in subsection (g), by inserting after determination of inconsistency, the following: except as provided in subsection (h),; (5)by redesignating subsections (h), (i), (j), (k), (l), (m), (n), (o), (p), (q), (r), and (s) as subsections (i), (j), (k), (l), (m), (n), (o), (p), (q), (r), (s), and (t), respectively; (6)by inserting after subsection (g) the following new subsection:

(h)

Authority with respect to reinsurance

(1)

Licensing of national reinsurers

(A)

Licensing

(i)

In general

The Director shall establish criteria necessary for the licensing and operation of a national reinsurer. (ii)

Eligibility

A United States entity shall be eligible to apply for a Federal license under this subsection to transact the business of reinsurance upon demonstration to the Director that the entity meets the definition of reinsurer under this section and all other criteria established by the Director. (iii)

Non-United States entities

A non-United States entity may obtain a Federal license under this subsection through the establishment of a United States branch which meets the eligibility requirements under clause (ii) and such other regulations as the Director may prescribe. (iv)

Issuance of license

If the Director determines that the applicant has satisfied the applicable eligibility requirements, the Director shall issue a Federal license to the applicant to transact the business of reinsurance. (B)

Revocation, suspension, or restriction of Federal license

The Director may revoke, suspend, or restrict a Federal license whenever the Director determines that the licensed entity is no longer operating in a manner consistent with the criteria for licensing and operation established by the Director. (C)

Conversion to State license

A national reinsurer may convert to a State-licensed reinsurer in accordance with applicable State law if— (i)such entity notifies the Director of its intention to convert in accordance with such procedures as the Director may prescribe by regulation; (ii)after conducting an appropriate review, the Director approves the conversion. (D)

Applicability of the Bankruptcy Code

A delinquency proceeding for the liquidation or reorganization of a United States national reinsurer shall proceed under the provisions of title 11. (2)

Supervisory arrangements

(A)

Authority

In order to realize the efficiencies and consumer benefits of a more harmonized international reinsurance regulatory system, the Secretary and the United States Trade Representative, jointly, shall be authorized to enter into supervisory arrangements for the recognition of qualified reinsurance supervisory authorities of non-United States jurisdictions that provide a level of protection for United States reinsurance consumers that is substantially equivalent to the level of protection achieved by the Director pursuant to the provisions of this subsection. (B)

Exchange of information

The entry into supervisory arrangements with qualified supervisory authorities of non-United States jurisdictions shall be preceded by an exchange and evaluation of relevant information regarding the form and nature of regulation in each such jurisdiction and the Secretary’s determination that such jurisdiction’s supervisory authority maintains and applies legal standards, regulatory requirements, and enforcement capabilities substantially equivalent to those applied by the Director, and that the awards of arbitration panels and judgments of appropriate United States courts are enforceable and collectable in the jurisdiction, pursuant to treaty, other agreement, or operation of that jurisdiction’s law. (C)

Requirements for validity

The Secretary and the United States Trade Representative may enter into supervisory arrangements only in cases in which the Secretary has determined that the requirements of subparagraph (B) have been satisfied and the arrangement explicitly provides for all of the following: (i)Identification of areas of regulation that will be the exclusive responsibility of the respective jurisdictions. (ii)The reciprocal treatment of reinsurance entities in accordance with each subject jurisdiction’s rules and regulations. (iii)A commitment to exchange relevant information on an on-going basis. (iv)A process for resolving disputed issues. (v)The application of chapter 15 of title 11 to cross-border insolvency cases involving entities from the subject jurisdiction. (vi)The terms and conditions for terminating the supervisory arrangement. (D)

Status of authorized foreign reinsurers

An authorized foreign reinsurer shall be authorized to transact the business of reinsurance to the extent authorized by the applicable supervisory arrangement. (3)

Preemption of State law

(A)

Inconsistent laws

All laws, regulations, provisions, or other actions of a State contrary to or inconsistent with the purposes of this subsection, except those which may be applicable to corporate taxes generally, are preempted to the extent that they apply to national reinsurers or authorized foreign reinsurers, or to their reinsurance agreements. (B)

Laws with disparate treatment

All laws, regulations, provisions, or other actions of a State are preempted to the extent that national reinsurers or authorized foreign reinsurers receive more or less favorable treatment than State licensed insurers or reinsurers pursuant to such laws, regulations, provisions, or other actions, solely on the basis of an entity’s status as a national reinsurer or authorized foreign reinsurer. (C)

Prohibition of interference

No State shall interfere, directly or indirectly, with a United States insurer or reinsurer— (i)applying for a Federal license or operating as a national reinsurer; or (ii)ceding insurance to a national reinsurer or an authorized foreign reinsurer for any purpose under this subsection. (D)

Credit for reinsurance

No State shall deny credit, either as an asset or a reduction of liabilities, on account of reinsurance ceded to a national reinsurer or an authorized foreign reinsurer under this subsection. (E)

Prohibition of enforcement

No State shall enforce a State law, regulation, provision, or other action to the extent that it is preempted pursuant to this paragraph. (F)

Determinations by Director

(i)

Preemption

The Director shall be authorized to determine that any State law, regulation, provision, or action shall be preempted pursuant to this paragraph. (ii)

Judicial review

Any State or any other person aggrieved by action of the Director under this paragraph may seek judicial review in the manner specified in chapter 7 of title 5. (4)

Cooperation between the Director and State insurance regulators

The Director shall— (A)consult, as the Director deems appropriate, with the relevant State insurance regulators concerning regulatory matters; (B)notify all State insurance regulators of supervisory arrangements entered into pursuant to paragraph (2); and (C)notify the relevant State insurance regulators of a change in the status of, or any administrative action taken by the Director against, a national reinsurer or an authorized foreign reinsurer. (5)

Rules and regulations

(A)

In general

The Director shall adopt regulations implementing the provisions of this subsection. The Director may issue any other rules, regulations, orders, or interpretations as the Director determines to be necessary to carry out the purposes of this subsection. (B)

Criteria

The rules and regulations prescribed under subparagraph (A) shall give due consideration to— (i)promoting financially secure reinsurance recoverables and capacity that protects the solvency of United States ceding insurers; (ii)the need for a competitive and healthy reinsurance market that provides sufficient capacity to meet ceding companies’ risk management needs through open market contracting and pricing practices; (iii)global capital and risk management, taking into account capital adequacy, assessment of internal controls, recognition of qualified internal capital models, and effective corporate governance; (iv)financial transparency that encourages and supports the cedents’ ability to assess counter party credit risk, including information regarding the national reinsurer’s financial condition and the national reinsurer’s performance in paying covered claims; (v)access to all necessary financial information, with appropriate provision for the confidentiality of that information; and (vi)harmonization with international standards for the prudential regulation of the business of reinsurance. (6)

Implementation

(A)

Licensing

The Director shall commence licensing of national reinsurers and the entry into supervisory arrangements after promulgation of final rules and regulations under this subsection, which shall occur not later than the expiration of the 2-year period beginning on the date of the enactment of this subsection. (B)

Applicability

The provisions of this subsection shall apply only to reinsurance agreements and supervisory arrangements entered into on or after the date of the enactment of this subsection. (7)

Effect of status

There shall be no determination under section 113 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that an entity is subject to supervision by the Board of Governors of the Federal Reserve System and subject to prudential standards (as such term is defined in such Act), in accordance with title I of such Act, on account of an entity’s status as a national reinsurer or authorized foreign reinsurer.

;

(7)in subsection (k)(1), as so redesignated, by inserting except as provided in subsection (h), before preempt—; (8)in subsection (l), as so redesignated, by striking Nothing and inserting Except as provided in subsections (c) and (h), nothing; and (9)in subsection (s), as so redesignated— (A)by redesignating paragraphs (2), (3), (4), (5), (6), (7), (8), (9), and (10) as paragraphs (3), (4), (6), (8), (9), (12), (13), (14), and (15), respectively; (B)by inserting after paragraph (1) the following new paragraph:

(2)

Authorized foreign reinsurer

The term authorized foreign reinsurer means a reinsurer that is domiciled in and subject to the regulation of a non-United States jurisdiction’s supervisory authority that has entered into a supervisory arrangement with the Director.

;

(C)by inserting after paragraph (4), as so redesignated, the following new paragraph:

(5)

Federal banking agency

The term Federal banking agency shall have the meaning give such term under section 2 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

;

(D)by inserting after paragraph (6), as so redesignated, the following new paragraph:

(7)

National reinsurer

The term national reinsurer means an entity to which the Director has issued a Federal license under subsection (h)(1) to transact the business of reinsurance.

; and

(E)by inserting after paragraph (9), as so redesignated, the following new paragraphs:

(10)

Reinsurance

The term reinsurance means the assumption by an insurer of all or part of a risk undertaken originally by another insurer. (11)

Reinsurer

The term reinsurer means, as determined by the Director, an insurer, to the extent that the insurer— (A)is principally engaged in the business of reinsurance; (B)does not conduct significant amounts of direct insurance as a percentage of its net premiums; and (C)is not engaged in an ongoing basis in the business of soliciting direct insurance.