[ARTICLE
4A]



CREDIT FOR
REINSURANCE



 



Cross References



 



  Reinsurance intermediary, see article 9B.



 



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



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



(2)  Credit shall be allowed when the reinsurance is
ceded 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 of
its submission to this State's jurisdiction;



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



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



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



(i)  Maintains a surplus as regards
policyholders in an amount that is not less than $20,000,000 and whose
accreditation has not been denied by the commissioner within ninety days of its
submission; or



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



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insurer, if the assuming insurer's accreditation has been revoked by the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



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



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



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



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



(4)  Credit shall be allowed as follows:



(A)  Credit shall be allowed when the
reinsurance is ceded to an assuming insurer that maintains a trust fund in a
qualified United States financial institution, as defined in section
431:4A-103(b), for the payment of the valid claims of its United States
policyholders and ceding insurers, their assigns, and successors in interest. 
The assuming insurer shall report annually to the commissioner information
substantially the same as that required to be reported on the National
Association of Insurance Commissioners annual statement form by licensed
insurers to enable the commissioner to determine the sufficiency of the trust
fund.  In the case of a single assuming insurer, the trust shall consist of a
trusteed account representing the assuming insurer's liabilities attributable
to business written in the United States and, in addition, the assuming insurer
shall maintain a trusteed surplus of not less than $20,000,000.  In the case of
a group including incorporated and individual unincorporated underwriters, the
trust shall consist of a trusteed account representing the group's liabilities
attributable to business written in the United States and, in addition, the
group shall maintain a trusteed surplus of which $100,000,000 shall be held
jointly for the benefit of United States ceding insurers of any member of the
group; the incorporated members of the group shall not be engaged in any
business other than underwriting as a member of the group and shall be subject
to the same level of solvency regulation and control by the group's domiciliary
regulator as are the unincorporated members; and the group shall make available
to the commissioner an annual certification of the solvency of each underwriter
by the group's domiciliary regulator and its independent public accountants;



(B)  In the case of a group of incorporated
insurers under common administration that complies with the filing requirements
contained in subparagraph (A), and that has continuously transacted an
insurance business outside the United States for at least three years
immediately prior to making application for accreditation, and that submits to
this State's authority to examine its books and records and bears the expense
of 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 several
liabilities attributable to business ceded by United States ceding insurers to
any member of the group pursuant to reinsurance contracts issued in the name of
such 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 ceding
insurers of any member of the group as additional security for any such
liabilities, and each member of the group shall make available to the
commissioner an annual certification of the member's solvency by the member's
domiciliary regulator and its independent public accountant;



(C)  The trust shall be established in a form
approved by the commissioner.  The trust instrument shall provide that
contested claims shall be valid and enforceable upon the final order of any
court of competent jurisdiction in the United States.  The trust shall vest
legal title to its assets in the trustees of the trust for its United States policyholders
and ceding insurers, their assigns, and successors in interest.  The trust and
the assuming insurer shall be subject to examination as determined by the
commissioner.  The trust must remain in effect for as long as the assuming
insurer shall have outstanding obligations due under the reinsurance agreements
subject 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 setting
forth the balance of the trust and listing the trust's investments at the
preceding year end and shall certify the date of termination of the trust, if
so planned, or certify that the trust shall not expire prior to the next
following December 31.



(5)  Credit shall be allowed when the reinsurance is
ceded 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 in
jurisdictions where the reinsurance is required by applicable law or regulation
of that jurisdiction.



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



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



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



This paragraph is not intended to conflict
with or override the obligation of the parties to a reinsurance agreement to
arbitrate their disputes, if such an obligation is created in the agreement. [L
1992, c 176, pt of §5; am L 1993, c 321, §11; am L 1994, c 34, §1]