§431:5-306  Reserve credit for reinsurance. (a)  An insurer may take credit for reserves on risks ceded to a reinsurer tothe extent reinsured, except that:

(1)  No credit shall be taken on account ofreinsurance in any reinsurer not qualified under article 4A or in any reinsurerthat has been disapproved by the commissioner; and

(2)  No credit shall be allowed, as an asset or as adeduction from liability, to any ceding insurer for reinsurance unless thereinsurance is payable by the assuming insurer on the basis of the liability ofthe ceding insurer under the contracts reinsured without diminution because ofthe insolvency of the ceding insurer.

(b)  A reinsurance agreement may provide that:

(1)  The liquidator, receiver or statutory successorof an insolvent ceding insurer shall be given written notice of the pendency ofa claim against the insolvent ceding insurer on the policy or bond reinsuredwithin a reasonable time after the claim is filed in the insolvency proceeding;and

(2)  Any assuming insurer may investigate such claimand interpose any defense or defenses which it may deem available to the cedinginsurer, its liquidator, receiver, or statutory successor, during the pendencyof the claim, in the proceeding where the claim is to be adjudicated, at itsown expense.

(c)  Subject to court approval, the expensethus incurred by the assuming insurer shall be chargeable against the insolventceding insurer as a part of the expense of liquidation to the extent of aproportionate share of the benefit which may accrue to the ceding insurersolely as a result of the defense undertaken by the assuming insurer.

(d)  Where two or more assuming insurers areinvolved in the same claim and a majority in interest elect to interposedefense to the claim, the expense shall be apportioned in accordance with theterms of the reinsurance agreement as though the expense had been incurred bythe ceding insurer. [L 1987, c 347, pt of §2; am L 2004, c 122, §18]