CHAPTER 10. CREDIT FOR REINSURANCE
IC 27-6-10
Chapter 10. Credit for Reinsurance
IC 27-6-10-1
"Accredited reinsurer" defined
Sec. 1. As used in this chapter, "accredited reinsurer" means aninsurer that:
(1) files with the commissioner evidence of the insurer'ssubmission to Indiana jurisdiction;
(2) submits to Indiana authority to examine the insurer's booksand records;
(3) is:
(A) licensed to transact insurance or reinsurance in at leastone (1) state; or
(B) in the case of a United States branch of an aliencompany (as defined in IC 27-1-2-3), entered through andlicensed to transact insurance or reinsurance in at least one(1) state; and
(4) files annually with the commissioner a copy of the insurer'sannual statement filed with the insurance department of theinsurer's state of domicile and a copy of the insurer's mostrecent audited financial statement, and:
(A) maintains a surplus as regards policyholders in anamount not less than twenty million dollars ($20,000,000)and whose accreditation has not been denied by thecommissioner within ninety (90) days of submission; or
(B) maintains a surplus as regards policyholders in anamount less than twenty million dollars ($20,000,000) andwhose accreditation has been approved by the commissioner.
As added by P.L.116-1994, SEC.54.
IC 27-6-10-2
"Ceding insurer" defined
Sec. 2. As used in this chapter, "ceding insurer" has the meaningset forth in IC 27-6-1.1-1.
As added by P.L.116-1994, SEC.54.
IC 27-6-10-3
"Commissioner" defined
Sec. 3. As used in this chapter, "commissioner" refers to theinsurance commissioner appointed under IC 27-1-1-2.
As added by P.L.116-1994, SEC.54.
IC 27-6-10-4
"Department" defined
Sec. 4. As used in this chapter, "department" refers to thedepartment of insurance created under IC 27-1-1-1.
As added by P.L.116-1994, SEC.54.
IC 27-6-10-5 "Qualified United States financial institution" as used inIC 27-6-10-14(c)
Sec. 5. As used in section 14(c) of this chapter, "qualified UnitedStates financial institution" means an institution that:
(1) is organized, or in the case of a United States office of aforeign banking organization, licensed under the laws of theUnited States or any state thereof;
(2) is regulated, supervised, and examined by United Statesfederal or state authorities having regulatory authority overbanks and trust companies; and
(3) has been determined by the commissioner or the SecuritiesValuation Office of the National Association of InsuranceCommissioners to meet the standards of financial condition andstanding as are considered necessary and appropriate to regulatethe quality of financial institutions whose letters of credit willbe acceptable to the commissioner.
As added by P.L.116-1994, SEC.54.
IC 27-6-10-6
"Qualified United States financial institution" as used inIC 27-6-10-11(a) and IC 27-6-10-14(b)
Sec. 6. As used in sections 11(a) and 14(b) of this chapter,"qualified United States financial institution" means an institutionthat:
(1) is organized, or in the case of a United States branch oragency office of a foreign banking organization, licensed underthe laws of the United States or any state thereof and has beengranted authority to operate with fiduciary powers; and
(2) is regulated, supervised, and examined by federal or stateauthorities having regulatory authority over banks and trustcompanies.
As added by P.L.116-1994, SEC.54.
IC 27-6-10-7
Asset or deduction from liability; requirements
Sec. 7. Credit for reinsurance shall be allowed to any domesticceding insurer as either an asset or a deduction from liability onaccount of reinsurance ceded only when:
(1) the reinsurer meets the requirements of:
(A) section 8 of this chapter;
(B) section 9 of this chapter;
(C) sections 10 and 12 of this chapter;
(D) sections 11 and 12 of this chapter; or
(E) section 13 of this chapter; and
(2) the reinsurance contract provides in substance that, in theevent of the insolvency of the ceding insurer, the reinsurance ispayable under a contract reinsured by the assuming insurer onthe basis of reported claims allowed in the liquidationproceedings, subject to court approval, without diminutionbecause of the insolvency of the ceding insurer. Payments under
this subdivision must be made directly to the ceding insurer orto the ceding insurer's domiciliary liquidator except as providedin IC 27-9-3-30.1. The reinsurance agreement may provide thatthe domiciliary liquidator of an insolvent ceding insurer shallgive written notice to an assuming insurer of the pendency of aclaim against the ceding insurer on the contract reinsured withina reasonable time after the claim is filed in the liquidationproceeding. During the pendency of the claim, any assuminginsurer may investigate the claim and interpose in theproceeding where the claim is to be adjudicated, at theassuming insurer's expense, any defenses that the assuminginsurer considers available to the ceding insurer or theliquidator. If two (2) or more assuming insurers are involved inthe same claim and a majority in interest elect to interpose adefense to the claim, the expense must be apportioned under theterms of the reinsurance agreement as though the expense hadbeen incurred by the ceding insurer.
As added by P.L.116-1994, SEC.54. Amended by P.L.233-1999,SEC.7.
IC 27-6-10-8
Assuming insurer licensed to transact insurance or reinsurance
Sec. 8. As provided in section 7 of this chapter, credit forreinsurance shall be allowed a domestic ceding insurer when thereinsurance is ceded to an assuming insurer that is licensed totransact insurance or reinsurance in Indiana.
As added by P.L.116-1994, SEC.54.
IC 27-6-10-9
Assuming insurer is accredited reinsurer; revocation ofaccreditation
Sec. 9. As provided in section 7 of this chapter, credit forreinsurance shall be allowed a domestic ceding insurer when thereinsurance is ceded to an assuming insurer that is an accreditedreinsurer in Indiana. No credit shall be allowed a domestic cedinginsurer if the assuming insurer's accreditation has been revoked bythe commissioner after notice and hearing.
As added by P.L.116-1994, SEC.54.
IC 27-6-10-10
Assuming insurers domiciled and licensed in another state
Sec. 10. As provided in section 7 of this chapter, credit shall beallowed a domestic ceding insurer when the reinsurance is ceded toan assuming insurer:
(1) that:
(A) is domiciled and licensed in; or
(B) in the case of a United States branch of an aliencompany (as defined in IC 27-1-2-3), is entered through;
a state that employs standards regarding credit for reinsurancesubstantially similar to those applicable under this chapter; (2) that:
(A) maintains a surplus as regards policyholders in anamount not less than twenty million dollars ($20,000,000);and
(B) submits to the authority of Indiana to examine theinsurer's books and records;
provided, however, that the requirement of clause (A) does notapply to reinsurance ceded and assumed pursuant to poolingarrangements among insurers in the same holding companysystem; and
(3) that complies with section 12 of this chapter.
As added by P.L.116-1994, SEC.54.
IC 27-6-10-11
Assuming insurer maintaining a trust fund in a qualified UnitedStates financial institution; report on sufficiency of fund; form andcontent of trust
Sec. 11. (a) As provided in section 7 of this chapter, credit forreinsurance shall be allowed a domestic ceding insurer when thereinsurance is ceded to an assuming insurer that maintains a trustfund in a qualified United States financial institution (as defined insection 6 of this chapter) for the payment of the valid claims of itsUnited States policyholders and ceding insurers, their assigns, andsuccessors in interest, and the assuming insurer complies withsection 12 of this chapter. In order for the commissioner to determinethe sufficiency of the trust fund, the assuming insurer shall reportannually to the commissioner substantially the same information asthat required to be reported by licensed insurers on the NationalAssociation of Insurance Commissioners' annual statement form. Atrust maintained under this section shall comply with the provisionsof this section.
(b) A trust shall comply with the following:
(1) In the case of a trust of a single assuming insurer:
(A) the trust shall consist of a trusteed account representingthe assuming insurer's liabilities attributable to businesswritten in the United States; and
(B) the assuming insurer shall maintain a trusteed surplus ofnot less than twenty million dollars ($20,000,000).
(2) In the case of a trust of a group including incorporated andindividual unincorporated underwriters that are an assuminginsurer:
(A) the trust shall consist of a trusteed account representingthe liabilities of the group attributable to business written inthe United States;
(B) the group shall maintain a trusteed surplus of which onehundred million dollars ($100,000,000) shall be held jointlyfor the benefit of United States ceding insurers of anymember of the group; and
(C) the incorporated members of the group shall not beengaged in any business other than underwriting as a
member of the group and shall be subject to the same levelof solvency regulation and control by the group's domiciliaryregulator as are the unincorporated members.
The group shall make available to the commissioner an annualcertification of the solvency of each underwriter by thedomiciliary regulator of the group and its independent publicaccountants.
(3) In the case of a trust of a group of incorporated insurersunder common administration that are an assuming insurer:
(A) the group:
(i) shall report annually to the commissioner as requiredunder subsection (a);
(ii) must have continuously transacted an insurancebusiness outside the United States for at least three (3)years immediately before making application foraccreditation;
(iii) shall submit to Indiana's authority to examine thebooks and records of the group and bear the expense of theexamination;
(iv) shall have an aggregate policyholders' surplus of tenbillion dollars ($10,000,000,000); and
(v) shall maintain a joint trusteed surplus of which onehundred million dollars ($100,000,000) shall be heldjointly for the benefit of United States ceding insurers ofany member of the group as additional security for anysuch liabilities;
(B) each member of the group shall make available to thecommissioner an annual certification of the member'ssolvency by the member's domiciliary regulator and itsindependent public accountant; and
(C) the trust shall be in an amount equal to the severalliabilities of the group attributable to business ceded byUnited States ceding insurers to any member of the grouppursuant to reinsurance contracts issued in the name of suchgroup.
(c) A trust shall be in a form approved by the commissioner.
(d) The trust instrument of a trust shall provide that contestedclaims are valid and enforceable upon the final order of any courtwith jurisdiction in the United States.
(e) A trust shall vest legal title to the trust's assets in the trusteesof the trust for the trust's United States policyholders and cedinginsurers, their assigns, and successors in interest.
(f) A trust and the assuming insurer shall be subject toexamination as determined by the commissioner.
(g) A trust shall remain in effect for as long as the assuminginsurer shall have outstanding obligations due under the reinsuranceagreements subject to the trust.
(h) Not later than February 28 of each year the trustees of a trustpermitted under this section shall report in writing to thecommissioner the following information: (1) The balance of the trust.
(2) A listing of the trust's investments at the preceding year end.
(3) A certification of the date of termination of the trust, ifapplicable, or a certification that the trust shall not expirebefore December 31.
(i) Credit may only be permitted under this section if an assuminginsurer also complies with section 12 of this chapter.
As added by P.L.116-1994, SEC.54.
IC 27-6-10-12
Assuming insurers not licensed or accredited in Indiana;disallowance of credits; exception
Sec. 12. If an assuming insurer is not licensed or accredited totransact insurance or reinsurance in Indiana, the credit permitted bysections 10 and 11 of this chapter shall not be allowed unless theassuming insurer agrees in the reinsurance agreements to thefollowing:
(1) That in the event of the failure of the assuming insurer toperform the assuming insurer's obligations under the terms ofthe reinsurance agreement, the assuming insurer, at the requestof the ceding insurer, shall:
(A) submit to the jurisdiction of any court with jurisdictionin any state of the United States;
(B) comply with all requirements necessary to give the courtdescribed in clause (A) jurisdiction; and
(C) abide by the final decision of the court or of anyappellate court in the event of an appeal; and
(2) To designate the commissioner or an attorney licensed in,and having offices in, Indiana as its true and lawful attorneyupon whom may be served any lawful process in any action,suit, or proceeding instituted by or on behalf of the cedingcompany.
This section is not intended to conflict with or override the obligationof the parties to a reinsurance agreement to arbitrate their disputes,if such an obligation is created in the agreement.
As added by P.L.116-1994, SEC.54.
IC 27-6-10-13
Assuming insurer failing to meet requirements of IC 27-6-10-8through IC 27-6-10-11; insurance of risks jurisdiction
Sec. 13. Credit shall be allowed to a domestic ceding insurer whenthe reinsurance is ceded to an assuming insurer not meeting therequirements of sections 8, 9, 10, or 11 but only with respect to theinsurance of risks located in jurisdictions where such reinsurance isrequired by applicable law or regulation of that jurisdiction.
As added by P.L.116-1994, SEC.54.
IC 27-6-10-14
Reduction from liability for reinsurance ceded to assuming insurernot meeting statutory requirements; amount; security Sec. 14. (a) A reduction from liability for the reinsurance cededby a domestic insurer to an assuming insurer not meeting therequirements of section 8, 9, 10, 11, 12, or 13 of this chapter shall beallowed in an amount not exceeding the liabilities carried by theceding insurer.
(b) The reduction permitted under subsection (a) shall be in theamount of funds held by or on behalf of the ceding insurer under areinsurance contract with the assuming insurer as security for thepayment of obligations thereunder. The security must be held in theUnited States subject to withdrawal solely by, and under theexclusive control of, the ceding insurer. A reduction under thissection is permitted in the amounts held by or on behalf of the cedinginsurer in a trust for the ceding insurer held in a qualified UnitedStates financial institution (as defined in section 6 of this chapter).
(c) The security described under subsection (b) may be in thefollowing forms:
(1) Cash.
(2) Securities listed by the Securities Valuation Office of theNational Association of Insurance Commissioners andqualifying as admitted assets.
(3) Clean, irrevocable, unconditional letters of credit issued orconfirmed by a qualified United States financial institution (asdefined in section 5 of this chapter) not later than December 31in the year for which filing is being made and in the possessionof the ceding company on or before the filing date of its annualstatement. Letters of credit that meet applicable standards ofissuer acceptability as of the dates of their issuance (orconfirmation) shall, notwithstanding the issuing (or confirming)institution's subsequent failure to meet applicable standards ofissuer acceptability, continue to be acceptable as security untilthe earlier of their expiration, extension, renewal, modification,or amendment.
(4) Any other form of security acceptable to the commissioner.
As added by P.L.116-1994, SEC.54. Amended by P.L.2-1995,SEC.105.
IC 27-6-10-15
Implementation of chapter
Sec. 15. The commissioner may adopt rules under IC 4-22-2 toimplement this chapter.
As added by P.L.116-1994, SEC.54.