40-221a.Reinsurance of risks ofand by Kansas companies.(a) Any insurance company organized under the laws of this state may (1)with the consent of the commissioner of insurance, cede all of its risks toany other solvent insurance company authorized to transact business in thisstate or accept all of the risks of any other company, (2) accept all orany part of an individual risk or all or any part of a particular class ofrisks which it is authorized to insure, and (3) cede all or any part of anindividual risk or all or any part of a particular class of risks toanother solvent insurer or insurers having the power to accept suchreinsurance.
(b) Any insurance company organized under the laws of this state maytake credit as an asset or as a deduction from loss and unearned premiumreserves on such ceded risks to the extent reinsured by an insurer orinsurers authorized to transact business in this state, but such credit onceded risks reinsured by any insurer which is not authorized to transactbusiness in this state may be taken in an amount not exceeding:
(1) The amount of deposits by, and funds withheld from, the assuminginsurer pursuant to express provision therefor in the reinsurance contract,as security for the payment of the obligations thereunder, if such depositsor funds are held subject to withdrawal by, and under the control of, theceding insurer or are placed in trust for such purposes in a qualified UnitedStates financialinstitution, if withdrawals from such trust cannot be made without theconsent of the ceding company;
(2) the amount of a clean and irrevocable letter of credit issued by aqualified United States financial institution if suchletter of credit is initially issued for a term of at least one year and by itsterms is automatically renewed at each expiration date for at least anadditional one-year term unless at least 30 days prior written notice ofintention notto renew is given to the ceding company by the issuing qualifiedUnited States financial institution or the assumingcompany and provided that such letter of credit is issued under arrangementssatisfactory to the commissioner of insurance as constituting security tothe ceding insurer substantially equal to that of a deposit under paragraph(1) of this subsection; or
(3) the amount of loss and unearned premium reserves on such ceded risks toan assuming insurer which maintains a trust fund in a qualified United Statesfinancial institution, as defined in (b)(3)(D), for the payment of the validclaims of its United States ceding insurers, their assignsand successors in interest. The assuming insurer shall report annually to thecommissioner information substantially the same as that required to be reportedon the national association of insurance commissioners annual statement form bylicensed insurers to enable the commissioner to determine the sufficiency ofthe trust fund. In the case of a single assuming insurer, the trust shallconsist of a trusteed account representing the assuming insurer's liabilityattributable to business written in the United States and, in addition, theassuming insurer shall maintain a trusteed surplus of not less than$20,000,000. In the case of a group including incorporated and individualunincorporated underwriters, the trust shall consist of a trusteed accountrepresenting the group's liabilities attributable to business written in theUnited States and, in addition, the group shall maintain a trusteed surplus ofwhich $100,000,000 shall be held jointly for the benefit of United Statesceding insurers of any member of the group; the incorporated members of thegroup shall not be engaged in any business other than underwriting as a memberof the group and shall be subject to the same level of solvency regulation andcontrol by the group's domiciliary regulator as are the unincorporated members;and the group shall make available to the commissioner an annual certificationof the solvency of each underwriter by the group's domiciliary regulator andits independent public accountants.
(A) Such trust must be in a form approved by the commissioner ofinsurance.The trust instrument shall provide that contested claims shall be valid andenforceable upon the final order of any court of competent jurisdiction in theUnited States. The trust shall vest legal title to its assets in the trusteesof the trust for its United States ceding insurers, theirassigns and successors in interest. The trust and the assuming group orinsurer shall besubject to examination as determined by the commissioner. The trust, describedherein, must remain in effect for as long as theassuming group or insurer shall haveoutstanding obligations due under the reinsurance agreements subject to thetrust.
(B) No later than February 28 of each year the trustees of thetrust shallreport to the commissioner in writing setting forth the balance of the trustand listing the trust's investments at the preceding year end and shall certifythe date of termination of the trust, if so planned, or certify that the trustshall not expire prior to the next following December 31.
(C) The credit authorized under subsection (b)(3) shall notbe allowed unless the assuming group or insurer agrees in the reinsuranceagreements:
(i) That in the event of the failure of the assuming group or insurer toperform itsobligations under the terms of the reinsurance agreement, the assuming groupor insurer,at the request of the ceding insurer, shall submit to the jurisdiction of anycourt of competent jurisdiction in any state of the United States, will complywith all requirements necessary to give such court jurisdiction, and will abideby the final decision of such court or of any appellate court in the event ofan appeal; and
(ii) to designate the commissioner or a designated attorney as its true andlawful attorney upon whom may be served any lawful process in any action, suitor proceeding instituted by or on behalf of the ceding company.
(iii) This provision is not intended to conflict with or override theobligation of the parties to a reinsurance agreement to arbitrate theirdisputes, if such an obligation to do so is created in the agreement.
(D) (i) For the purposes of paragraphs (1) and (3) ofsubsection (b), a "qualified United States financial institution" means,for purposes of those provisions of this law specifying those institutions thatare eligible to act as a fiduciary of a trust, an institution that:
(aa) Is organized, or (in the case of a U.S. branch oragency office of a foreign banking organization) licensed, under the laws ofthe United States or any state thereof and has been granted authority tooperate with fiduciary powers; and
(bb) is regulated, supervised and examined by federal orstate authorities having regulatory authority over banks and trust companies.
(ii) For the purposes of paragraph (2) of subsection (b), "qualifiedUnited States financial institution" means, for the purpose of those provisionsof this law specifying those institutions that are eligible to issue a letterof credit, an institution that:
(aa) Is organized or (in the case of a United States office of a foreignbanking organization) licensed, under the laws of the United States or anystate thereof;
(bb) is regulated, supervised and examined by United States federal or stateauthorities having regulatory authority over banks and trust companies; and
(cc) has been determined by the insurance commissioner to meet such standardsof financial condition and standing as are considered necessary and appropriateto regulate the quality of financial institutions whose letters of credit willbe acceptable to the commissioner.
In making determinations under this clause, the commissioner may consult withthe securities valuation office of the national association of insurancecommissioners.
(c) No credit shall be allowed,as an admitted asset or deduction from liability, to any ceding insurerorganized under the laws of thisstatefor reinsurance, unless the reinsurance contract provides, in substance,that in the event of the insolvency of the ceding insurer, the reinsuranceshall be payable under a contract reinsured by the assuming insurer on thebasis of the liability of the ceding company under the contract or contractsreinsured, as approved bythe liquidation court,without diminution because of theinsolvency of the ceding company. Anyreinsurance agreement entered into with a domestic insurer which may becanceled on less than 90 days' notice, and which cancellation would constitutea material cancellation as defined by K.S.A. 40-2,156a and amendments thereto,must provide in the reinsurance agreement, in substance, for a run-off of thereinsurance in force at the date of cancellation, unless the agreement iscanceled for nonpayment of premium or fraud in the inducement. Reinsurancepayments shall be made directly to the ceding insurer or to its domiciliaryliquidator except: (1) Where the reinsurance contract or policy reinsuredspecifically provides another payee of such reinsurance in the event of theinsolvency of the ceding insurer; or (2) where the assuming insurer, with theconsent of the direct insured, has assumed such policy obligations of theceding insurer as direct obligations of the assuming insurer to the payeesunder such policies and in substitution for the obligations of the cedinginsurer to such payees.
(d) The reinsurance agreement may provide that the domiciliary liquidatorof an insolvent ceding insurer shall givewritten notice to the assuming insurer of the pendency of a claim against suchceding insurer on the contract reinsured within a reasonable time after suchclaim is filed in the liquidation proceeding. During the pendency of suchclaim, any assuming insurer may investigate such claim and interpose, at itsown expense, in the proceeding where such claim is to be adjudicated anydefenses which it deems available to the ceding insurer, or its liquidator.Such expense may be filed as a claim against the insolvent ceding insurer tothe extent of a proportionate share of the benefit which may accrue to theceding insurer solely as a result of the defense undertaken by the assuminginsurer. Where two or more assuming insurers are involved in the same claim anda majority in interest elect to interpose a defense to such claim, the expenseshall be apportioned in accordance with the terms of the reinsurance agreementas though such expense had been incurred by the ceding insurer.
40-221a.Reinsurance of risks ofand by Kansas companies.(a) Any insurance company organized under the laws of this state may (1)with the consent of the commissioner of insurance, cede all of its risks toany other solvent insurance company authorized to transact business in thisstate or accept all of the risks of any other company, (2) accept all orany part of an individual risk or all or any part of a particular class ofrisks which it is authorized to insure, and (3) cede all or any part of anindividual risk or all or any part of a particular class of risks toanother solvent insurer or insurers having the power to accept suchreinsurance.
(b) Any insurance company organized under the laws of this state maytake credit as an asset or as a deduction from loss and unearned premiumreserves on such ceded risks to the extent reinsured by an insurer orinsurers authorized to transact business in this state, but such credit onceded risks reinsured by any insurer which is not authorized to transactbusiness in this state may be taken in an amount not exceeding:
(1) The amount of deposits by, and funds withheld from, the assuminginsurer pursuant to express provision therefor in the reinsurance contract,as security for the payment of the obligations thereunder, if such depositsor funds are held subject to withdrawal by, and under the control of, theceding insurer or are placed in trust for such purposes in a qualified UnitedStates financialinstitution, if withdrawals from such trust cannot be made without theconsent of the ceding company;
(2) the amount of a clean and irrevocable letter of credit issued by aqualified United States financial institution if suchletter of credit is initially issued for a term of at least one year and by itsterms is automatically renewed at each expiration date for at least anadditional one-year term unless at least 30 days prior written notice ofintention notto renew is given to the ceding company by the issuing qualifiedUnited States financial institution or the assumingcompany and provided that such letter of credit is issued under arrangementssatisfactory to the commissioner of insurance as constituting security tothe ceding insurer substantially equal to that of a deposit under paragraph(1) of this subsection; or
(3) the amount of loss and unearned premium reserves on such ceded risks toan assuming insurer which maintains a trust fund in a qualified United Statesfinancial institution, as defined in (b)(3)(D), for the payment of the validclaims of its United States ceding insurers, their assignsand successors in interest. The assuming insurer shall report annually to thecommissioner information substantially the same as that required to be reportedon the national association of insurance commissioners annual statement form bylicensed insurers to enable the commissioner to determine the sufficiency ofthe trust fund. In the case of a single assuming insurer, the trust shallconsist of a trusteed account representing the assuming insurer's liabilityattributable to business written in the United States and, in addition, theassuming insurer shall maintain a trusteed surplus of not less than$20,000,000. In the case of a group including incorporated and individualunincorporated underwriters, the trust shall consist of a trusteed accountrepresenting the group's liabilities attributable to business written in theUnited States and, in addition, the group shall maintain a trusteed surplus ofwhich $100,000,000 shall be held jointly for the benefit of United Statesceding insurers of any member of the group; the incorporated members of thegroup shall not be engaged in any business other than underwriting as a memberof the group and shall be subject to the same level of solvency regulation andcontrol by the group's domiciliary regulator as are the unincorporated members;and the group shall make available to the commissioner an annual certificationof the solvency of each underwriter by the group's domiciliary regulator andits independent public accountants.
(A) Such trust must be in a form approved by the commissioner ofinsurance.The trust instrument shall provide that contested claims shall be valid andenforceable upon the final order of any court of competent jurisdiction in theUnited States. The trust shall vest legal title to its assets in the trusteesof the trust for its United States ceding insurers, theirassigns and successors in interest. The trust and the assuming group orinsurer shall besubject to examination as determined by the commissioner. The trust, describedherein, must remain in effect for as long as theassuming group or insurer shall haveoutstanding obligations due under the reinsurance agreements subject to thetrust.
(B) No later than February 28 of each year the trustees of thetrust shallreport to the commissioner in writing setting forth the balance of the trustand listing the trust's investments at the preceding year end and shall certifythe date of termination of the trust, if so planned, or certify that the trustshall not expire prior to the next following December 31.
(C) The credit authorized under subsection (b)(3) shall notbe allowed unless the assuming group or insurer agrees in the reinsuranceagreements:
(i) That in the event of the failure of the assuming group or insurer toperform itsobligations under the terms of the reinsurance agreement, the assuming groupor insurer,at the request of the ceding insurer, shall submit to the jurisdiction of anycourt of competent jurisdiction in any state of the United States, will complywith all requirements necessary to give such court jurisdiction, and will abideby the final decision of such court or of any appellate court in the event ofan appeal; and
(ii) to designate the commissioner or a designated attorney as its true andlawful attorney upon whom may be served any lawful process in any action, suitor proceeding instituted by or on behalf of the ceding company.
(iii) This provision is not intended to conflict with or override theobligation of the parties to a reinsurance agreement to arbitrate theirdisputes, if such an obligation to do so is created in the agreement.
(D) (i) For the purposes of paragraphs (1) and (3) ofsubsection (b), a "qualified United States financial institution" means,for purposes of those provisions of this law specifying those institutions thatare eligible to act as a fiduciary of a trust, an institution that:
(aa) Is organized, or (in the case of a U.S. branch oragency office of a foreign banking organization) licensed, under the laws ofthe United States or any state thereof and has been granted authority tooperate with fiduciary powers; and
(bb) is regulated, supervised and examined by federal orstate authorities having regulatory authority over banks and trust companies.
(ii) For the purposes of paragraph (2) of subsection (b), "qualifiedUnited States financial institution" means, for the purpose of those provisionsof this law specifying those institutions that are eligible to issue a letterof credit, an institution that:
(aa) Is organized or (in the case of a United States office of a foreignbanking organization) licensed, under the laws of the United States or anystate thereof;
(bb) is regulated, supervised and examined by United States federal or stateauthorities having regulatory authority over banks and trust companies; and
(cc) has been determined by the insurance commissioner to meet such standardsof financial condition and standing as are considered necessary and appropriateto regulate the quality of financial institutions whose letters of credit willbe acceptable to the commissioner.
In making determinations under this clause, the commissioner may consult withthe securities valuation office of the national association of insurancecommissioners.
(c) No credit shall be allowed,as an admitted asset or deduction from liability, to any ceding insurerorganized under the laws of thisstatefor reinsurance, unless the reinsurance contract provides, in substance,that in the event of the insolvency of the ceding insurer, the reinsuranceshall be payable under a contract reinsured by the assuming insurer on thebasis of the liability of the ceding company under the contract or contractsreinsured, as approved bythe liquidation court,without diminution because of theinsolvency of the ceding company. Anyreinsurance agreement entered into with a domestic insurer which may becanceled on less than 90 days' notice, and which cancellation would constitutea material cancellation as defined by K.S.A. 40-2,156a and amendments thereto,must provide in the reinsurance agreement, in substance, for a run-off of thereinsurance in force at the date of cancellation, unless the agreement iscanceled for nonpayment of premium or fraud in the inducement. Reinsurancepayments shall be made directly to the ceding insurer or to its domiciliaryliquidator except: (1) Where the reinsurance contract or policy reinsuredspecifically provides another payee of such reinsurance in the event of theinsolvency of the ceding insurer; or (2) where the assuming insurer, with theconsent of the direct insured, has assumed such policy obligations of theceding insurer as direct obligations of the assuming insurer to the payeesunder such policies and in substitution for the obligations of the cedinginsurer to such payees.
(d) The reinsurance agreement may provide that the domiciliary liquidatorof an insolvent ceding insurer shall givewritten notice to the assuming insurer of the pendency of a claim against suchceding insurer on the contract reinsured within a reasonable time after suchclaim is filed in the liquidation proceeding. During the pendency of suchclaim, any assuming insurer may investigate such claim and interpose, at itsown expense, in the proceeding where such claim is to be adjudicated anydefenses which it deems available to the ceding insurer, or its liquidator.Such expense may be filed as a claim against the insolvent ceding insurer tothe extent of a proportionate share of the benefit which may accrue to theceding insurer solely as a result of the defense undertaken by the assuminginsurer. Where two or more assuming insurers are involved in the same claim anda majority in interest elect to interpose a defense to such claim, the expenseshall be apportioned in accordance with the terms of the reinsurance agreementas though such expense had been incurred by the ceding insurer.
40-221a.Reinsurance of risks ofand by Kansas companies.(a) Any insurance company organized under the laws of this state may (1)with the consent of the commissioner of insurance, cede all of its risks toany other solvent insurance company authorized to transact business in thisstate or accept all of the risks of any other company, (2) accept all orany part of an individual risk or all or any part of a particular class ofrisks which it is authorized to insure, and (3) cede all or any part of anindividual risk or all or any part of a particular class of risks toanother solvent insurer or insurers having the power to accept suchreinsurance.
(b) Any insurance company organized under the laws of this state maytake credit as an asset or as a deduction from loss and unearned premiumreserves on such ceded risks to the extent reinsured by an insurer orinsurers authorized to transact business in this state, but such credit onceded risks reinsured by any insurer which is not authorized to transactbusiness in this state may be taken in an amount not exceeding:
(1) The amount of deposits by, and funds withheld from, the assuminginsurer pursuant to express provision therefor in the reinsurance contract,as security for the payment of the obligations thereunder, if such depositsor funds are held subject to withdrawal by, and under the control of, theceding insurer or are placed in trust for such purposes in a qualified UnitedStates financialinstitution, if withdrawals from such trust cannot be made without theconsent of the ceding company;
(2) the amount of a clean and irrevocable letter of credit issued by aqualified United States financial institution if suchletter of credit is initially issued for a term of at least one year and by itsterms is automatically renewed at each expiration date for at least anadditional one-year term unless at least 30 days prior written notice ofintention notto renew is given to the ceding company by the issuing qualifiedUnited States financial institution or the assumingcompany and provided that such letter of credit is issued under arrangementssatisfactory to the commissioner of insurance as constituting security tothe ceding insurer substantially equal to that of a deposit under paragraph(1) of this subsection; or
(3) the amount of loss and unearned premium reserves on such ceded risks toan assuming insurer which maintains a trust fund in a qualified United Statesfinancial institution, as defined in (b)(3)(D), for the payment of the validclaims of its United States ceding insurers, their assignsand successors in interest. The assuming insurer shall report annually to thecommissioner information substantially the same as that required to be reportedon the national association of insurance commissioners annual statement form bylicensed insurers to enable the commissioner to determine the sufficiency ofthe trust fund. In the case of a single assuming insurer, the trust shallconsist of a trusteed account representing the assuming insurer's liabilityattributable to business written in the United States and, in addition, theassuming insurer shall maintain a trusteed surplus of not less than$20,000,000. In the case of a group including incorporated and individualunincorporated underwriters, the trust shall consist of a trusteed accountrepresenting the group's liabilities attributable to business written in theUnited States and, in addition, the group shall maintain a trusteed surplus ofwhich $100,000,000 shall be held jointly for the benefit of United Statesceding insurers of any member of the group; the incorporated members of thegroup shall not be engaged in any business other than underwriting as a memberof the group and shall be subject to the same level of solvency regulation andcontrol by the group's domiciliary regulator as are the unincorporated members;and the group shall make available to the commissioner an annual certificationof the solvency of each underwriter by the group's domiciliary regulator andits independent public accountants.
(A) Such trust must be in a form approved by the commissioner ofinsurance.The trust instrument shall provide that contested claims shall be valid andenforceable upon the final order of any court of competent jurisdiction in theUnited States. The trust shall vest legal title to its assets in the trusteesof the trust for its United States ceding insurers, theirassigns and successors in interest. The trust and the assuming group orinsurer shall besubject to examination as determined by the commissioner. The trust, describedherein, must remain in effect for as long as theassuming group or insurer shall haveoutstanding obligations due under the reinsurance agreements subject to thetrust.
(B) No later than February 28 of each year the trustees of thetrust shallreport to the commissioner in writing setting forth the balance of the trustand listing the trust's investments at the preceding year end and shall certifythe date of termination of the trust, if so planned, or certify that the trustshall not expire prior to the next following December 31.
(C) The credit authorized under subsection (b)(3) shall notbe allowed unless the assuming group or insurer agrees in the reinsuranceagreements:
(i) That in the event of the failure of the assuming group or insurer toperform itsobligations under the terms of the reinsurance agreement, the assuming groupor insurer,at the request of the ceding insurer, shall submit to the jurisdiction of anycourt of competent jurisdiction in any state of the United States, will complywith all requirements necessary to give such court jurisdiction, and will abideby the final decision of such court or of any appellate court in the event ofan appeal; and
(ii) to designate the commissioner or a designated attorney as its true andlawful attorney upon whom may be served any lawful process in any action, suitor proceeding instituted by or on behalf of the ceding company.
(iii) This provision is not intended to conflict with or override theobligation of the parties to a reinsurance agreement to arbitrate theirdisputes, if such an obligation to do so is created in the agreement.
(D) (i) For the purposes of paragraphs (1) and (3) ofsubsection (b), a "qualified United States financial institution" means,for purposes of those provisions of this law specifying those institutions thatare eligible to act as a fiduciary of a trust, an institution that:
(aa) Is organized, or (in the case of a U.S. branch oragency office of a foreign banking organization) licensed, under the laws ofthe United States or any state thereof and has been granted authority tooperate with fiduciary powers; and
(bb) is regulated, supervised and examined by federal orstate authorities having regulatory authority over banks and trust companies.
(ii) For the purposes of paragraph (2) of subsection (b), "qualifiedUnited States financial institution" means, for the purpose of those provisionsof this law specifying those institutions that are eligible to issue a letterof credit, an institution that:
(aa) Is organized or (in the case of a United States office of a foreignbanking organization) licensed, under the laws of the United States or anystate thereof;
(bb) is regulated, supervised and examined by United States federal or stateauthorities having regulatory authority over banks and trust companies; and
(cc) has been determined by the insurance commissioner to meet such standardsof financial condition and standing as are considered necessary and appropriateto regulate the quality of financial institutions whose letters of credit willbe acceptable to the commissioner.
In making determinations under this clause, the commissioner may consult withthe securities valuation office of the national association of insurancecommissioners.
(c) No credit shall be allowed,as an admitted asset or deduction from liability, to any ceding insurerorganized under the laws of thisstatefor reinsurance, unless the reinsurance contract provides, in substance,that in the event of the insolvency of the ceding insurer, the reinsuranceshall be payable under a contract reinsured by the assuming insurer on thebasis of the liability of the ceding company under the contract or contractsreinsured, as approved bythe liquidation court,without diminution because of theinsolvency of the ceding company. Anyreinsurance agreement entered into with a domestic insurer which may becanceled on less than 90 days' notice, and which cancellation would constitutea material cancellation as defined by K.S.A. 40-2,156a and amendments thereto,must provide in the reinsurance agreement, in substance, for a run-off of thereinsurance in force at the date of cancellation, unless the agreement iscanceled for nonpayment of premium or fraud in the inducement. Reinsurancepayments shall be made directly to the ceding insurer or to its domiciliaryliquidator except: (1) Where the reinsurance contract or policy reinsuredspecifically provides another payee of such reinsurance in the event of theinsolvency of the ceding insurer; or (2) where the assuming insurer, with theconsent of the direct insured, has assumed such policy obligations of theceding insurer as direct obligations of the assuming insurer to the payeesunder such policies and in substitution for the obligations of the cedinginsurer to such payees.
(d) The reinsurance agreement may provide that the domiciliary liquidatorof an insolvent ceding insurer shall givewritten notice to the assuming insurer of the pendency of a claim against suchceding insurer on the contract reinsured within a reasonable time after suchclaim is filed in the liquidation proceeding. During the pendency of suchclaim, any assuming insurer may investigate such claim and interpose, at itsown expense, in the proceeding where such claim is to be adjudicated anydefenses which it deems available to the ceding insurer, or its liquidator.Such expense may be filed as a claim against the insolvent ceding insurer tothe extent of a proportionate share of the benefit which may accrue to theceding insurer solely as a result of the defense undertaken by the assuminginsurer. Where two or more assuming insurers are involved in the same claim anda majority in interest elect to interpose a defense to such claim, the expenseshall be apportioned in accordance with the terms of the reinsurance agreementas though such expense had been incurred by the ceding insurer.
