RFR-Page 2
These rules were promulgated in 1996, following the enactment of Chapter 11 of the Insurance
Code of 1956 (Code), MCL 500.1101 to 500.1127, to regulate reinsurance, which occurs when an
insurer cedes a portion of its risk to another insurer that assumes the risk. See, generally, 1994 PA
226. These rules were amended in 2011 and 2019, following changes the National Association of
Insurance Commissioners (NAIC) made to its model law and regulation and legislative
amendments to the Code designed to bring Michigan into compliance with the NAIC model law
and regulation. See 2018 PA 91. Specifically, these rules and Sections 1103, 1105, and 1106 of the
Code, MCL 500.1103, 500.1105, and 500.1106, establish requirements for insurers to take credit,
i.e., as an asset or reduction from liability, for reinsurance ceded to an assuming insurer. Section
1103 allows credit for reinsurance if ceded to an assuming insurer that meets any of subsections
(2) through (6) of MCL 500.1103. The NAIC has made additional changes to its model law and
regulation to facilitate the consistency of state law with the “covered agreement” entered by the
United States on September 22, 2017, authorized under 31 USC 314. The changes to the NAIC
models necessitate corresponding legislative amendments and amendments to these rules to
provide for additional categories of assuming insurers that will provide the ceding insurer credit
for the cession. The legislative amendments are contained within Senate Bill 1015’20 (PA 328 of
2020), which was signed by Governor Whitmer on December 29, 2020. These proposed rules
would implement those legislative amendments.
8. Please cite the specific promulgation authority for the rules (i.e. department director,
commission, board, etc.).
Section 1106 of the Code, MCL 500.1106, permits the Director of DIFS to promulgate rules
regarding certain reinsurance agreements. Existing rules are also authorized under Section 1103
(6) of the Code, MCL 500.1103, and Section 1103, as amended by Senate Bill 1015, includes
additional rulemaking authority. Furthermore, the Director is authorized to promulgate rules to
effectuate and enforce the insurance laws of Michigan under Section 210 of the Code, MCL
500.210.
A. Please list all applicable statutory references (MCLs, Executive Orders, etc.).
MCL 500.210, MCL 500.1103, MCL 500.1106, and Executive Reorganization Order No. 2013-1,
MCL 550.991.
B. Are the rules mandated by any applicable constitutional or statutory provision? If so, please
explain.
Yes. Certain existing rules are mandated under Section 1103(6) of the Code, MCL 500.1103(6),
and Senate Bill 1015 requires that the Director promulgate additional rules under Section 1103.
9. Please describe the extent to which the rules conflict with or duplicate similar rules,
compliance requirements, or other standards adopted at the state, regional, or federal level.
These rules do not conflict with or duplicate similar rules, compliance requirements, or other
standards adopted at the state, regional, or federal level, apart from their implementation of the
NAIC model law and regulation, as explained above.
10. Is the subject matter of the rules currently contained in any guideline, handbook, manual,
instructional bulletin, form with instructions, or operational memoranda?
No.
11. Are the rules listed on the department’s annual regulatory plan as rules to be processed
for the current year?
Yes.
12. Will the proposed rules be promulgated under Section 44 of the Administrative Procedures
Act, 1969 PA 306, MCL 24.244, or under the full rulemaking process?
MCL 24.239