[ARTICLE4A]

CREDIT FORREINSURANCE

 

Cross References

 

  Reinsurance intermediary, see article 9B.

 

§431:4A-101  Credit allowed a domesticceding insurer.  Credit for reinsurance shall be allowed a domestic cedinginsurer as either an asset or a deduction from liability on the domestic cedinginsurer's financial statements on account of reinsurance ceded only when thereinsurer meets the requirements of paragraph (1), (2), (3), (4), or (5).  Therequirements of paragraph (6) must also be met if the reinsurer attempts tomeet the requirements of paragraph (3) or (4).

(1)  Credit shall be allowed when the reinsurance isceded to an assuming insurer that is licensed to transact insurance orreinsurance in this State.

(2)  Credit shall be allowed when the reinsurance isceded to an assuming insurer that is accredited as a reinsurer in this State. An accredited reinsurer is one that:

(A)  Files with the commissioner evidence ofits submission to this State's jurisdiction;

(B)  Submits to this State's authority toexamine its books and records;

(C)  Is licensed to transact insurance orreinsurance in at least one state, or in the case of a United States branch ofan alien assuming insurer, is entered through and licensed to transactinsurance or reinsurance in at least one state;

(D)  Files annually with the commissioner acopy of its annual statement filed with the insurance department of its stateof domicile and a copy of its most recent audited financial statement; andeither:

(i)  Maintains a surplus as regardspolicyholders in an amount that is not less than $20,000,000 and whoseaccreditation has not been denied by the commissioner within ninety days of itssubmission; or

(ii)  Maintains a surplus as regardspolicyholders in an amount less than $20,000,000 and whose accreditation hasbeen approved by the commissioner.

No credit shall be allowed a domestic cedinginsurer, if the assuming insurer's accreditation has been revoked by thecommissioner after notice and hearing.

(3)  Credit shall be allowed when the reinsurance isceded to an assuming insurer that is domiciled and licensed in, or in the caseof a United States branch of an alien assuming insurer is entered through, astate that employs standards regarding credit for reinsurance equal to or exceedingthose applicable under this article and the assuming insurer or United Statesbranch of an alien assuming insurer:

(A)  Maintains a surplus as regardspolicyholders in an amount not less than $20,000,000; and

(B)  Submits to the authority of this State toexamine its books and records;

provided that the requirement ofsubparagraph (A) does not apply to reinsurance ceded and assumed pursuant topooling arrangements among insurers in the same holding company system.

(4)  Credit shall be allowed as follows:

(A)  Credit shall be allowed when thereinsurance is ceded to an assuming insurer that maintains a trust fund in aqualified United States financial institution, as defined in section431:4A-103(b), for the payment of the valid claims of its United Statespolicyholders and ceding insurers, their assigns, and successors in interest. The assuming insurer shall report annually to the commissioner informationsubstantially the same as that required to be reported on the NationalAssociation of Insurance Commissioners annual statement form by licensedinsurers to enable the commissioner to determine the sufficiency of the trustfund.  In the case of a single assuming insurer, the trust shall consist of atrusteed account representing the assuming insurer's liabilities attributableto business written in the United States and, in addition, the assuming insurershall maintain a trusteed surplus of not less than $20,000,000.  In the case ofa group including incorporated and individual unincorporated underwriters, thetrust shall consist of a trusteed account representing the group's liabilitiesattributable to business written in the United States and, in addition, thegroup shall maintain a trusteed surplus of which $100,000,000 shall be heldjointly for the benefit of United States ceding insurers of any member of thegroup; the incorporated members of the group shall not be engaged in anybusiness other than underwriting as a member of the group and shall be subjectto the same level of solvency regulation and control by the group's domiciliaryregulator as are the unincorporated members; and the group shall make availableto the commissioner an annual certification of the solvency of each underwriterby the group's domiciliary regulator and its independent public accountants;

(B)  In the case of a group of incorporatedinsurers under common administration that complies with the filing requirementscontained in subparagraph (A), and that has continuously transacted aninsurance business outside the United States for at least three yearsimmediately prior to making application for accreditation, and that submits tothis State's authority to examine its books and records and bears the expenseof the examination, and that has aggregate policyholders' surplus of$10,000,000,000, the trust shall be in an amount equal to the group's severalliabilities attributable to business ceded by United States ceding insurers toany member of the group pursuant to reinsurance contracts issued in the name ofsuch group; and the group shall maintain a joint trusteed surplus, of which$100,000,000 shall be held jointly for the benefit of United States cedinginsurers of any member of the group as additional security for any suchliabilities, and each member of the group shall make available to thecommissioner an annual certification of the member's solvency by the member'sdomiciliary regulator and its independent public accountant;

(C)  The trust shall be established in a formapproved by the commissioner.  The trust instrument shall provide thatcontested claims shall be valid and enforceable upon the final order of anycourt of competent jurisdiction in the United States.  The trust shall vestlegal title to its assets in the trustees of the trust for its United States policyholdersand ceding insurers, their assigns, and successors in interest.  The trust andthe assuming insurer shall be subject to examination as determined by thecommissioner.  The trust must remain in effect for as long as the assuminginsurer shall have outstanding obligations due under the reinsurance agreementssubject to the trust; and

(D)  No later than February 28 of each year,the trustees of the trust shall report to the commissioner in writing settingforth the balance of the trust and listing the trust's investments at thepreceding year end and shall certify the date of termination of the trust, ifso planned, or certify that the trust shall not expire prior to the nextfollowing December 31.

(5)  Credit shall be allowed when the reinsurance isceded to an assuming insurer not meeting the requirements of paragraph (1),(2), (3), or (4), but only with respect to the insurance of risks located injurisdictions where the reinsurance is required by applicable law or regulationof that jurisdiction.

(6)  If the assuming insurer is not licensed oraccredited to transact insurance or reinsurance in this State, the creditpermitted by paragraphs (3) and (4) shall not be allowed unless the assuminginsurer agrees in the reinsurance agreements:

(A)  That in the event of the failure of theassuming insurer to perform its obligations under the terms of the reinsuranceagreement, the assuming insurer, at the request of the ceding insurer, shallsubmit to the jurisdiction of any court of competent jurisdiction in any stateof the United States, will comply with all requirements necessary to give thatcourt jurisdiction, and will abide by the final decision of that court or ofany appellate court in the event of an appeal; and

(B)  To designate the commissioner or adesignated attorney as its true and lawful attorney upon whom may be served anylawful process in any action, suit, or proceeding instituted by or on behalf ofthe ceding company.

This paragraph is not intended to conflictwith or override the obligation of the parties to a reinsurance agreement toarbitrate their disputes, if such an obligation is created in the agreement. [L1992, c 176, pt of §5; am L 1993, c 321, §11; am L 1994, c 34, §1]