Reinsurance, when allowed as an asset or reduction from liability.
375.246. 1. Credit for reinsurance shall be allowed a domestic cedinginsurer as either an asset or a reduction from liability on account ofreinsurance ceded only when the reinsurer meets the requirements ofsubdivisions (1) to (5) of this subsection. Credit shall be allowed pursuantto subdivision (1), (2) or (3) of this subsection only as respects cessions ofthose kinds or classes of business which the assuming insurer is licensed orotherwise permitted to write or assume in its state of domicile or, in thecase of a United States branch of an alien assuming insurer, in the statethrough which it is entered and licensed to transact insurance or reinsurance. Credit shall be allowed pursuant to subdivision (3) or (4) of this subsectiononly if the applicable requirements of subdivision (6) have been satisfied.
(1) Credit shall be allowed when the reinsurance is ceded to an assuminginsurer that is licensed to transact insurance in this state;
(2) Credit shall be allowed when the reinsurance is ceded to an assuminginsurer that is accredited as a reinsurer in this state. An accreditedreinsurer is one that:
(a) Files with the director evidence of its submission to this state'sjurisdiction;
(b) Submits to the authority of the department of insurance, financialinstitutions and professional registration to examine its books and records;
(c) Is licensed to transact insurance or reinsurance in at least onestate, or in the case of a United States branch of an alien assuming insureris entered through and licensed to transact insurance or reinsurance in atleast one state;
(d) Files annually with the director a copy of its annual statementfiled with the insurance department of its state of domicile and a copy of itsmost recent audited financial statement; and
(e) Maintains a surplus as regards policyholders in an amount not lessthan twenty million dollars and whose accreditation has not been denied by thedirector within ninety days of its submission; or
(f) Maintains a surplus as regards policyholders in an amount less thantwenty million dollars and whose accreditation has been approved by thedirector.
No credit shall be allowed a domestic ceding insurer if the assuming insurer'saccreditation has been revoked by the director after notice and hearing;
(3) Credit shall be allowed when the reinsurance is ceded to an assuminginsurer that is domiciled in, or in the case of a United States branch of analien assuming insurer is entered through, a state that employs standardsregarding credit for reinsurance substantially similar to those applicableunder this statute and the assuming insurer or United States branch of analien assuming insurer:
(a) Maintains a surplus as regards policyholders in an amount not lessthan twenty million dollars; except that this paragraph does not apply toreinsurance ceded and assumed pursuant to pooling arrangements among insurersin the same holding company system; and
(b) Submits to the authority of the department of insurance, financialinstitutions and professional registration to examine its books and records;
(4) (a) Credit shall be allowed when the reinsurance is ceded to anassuming insurer that maintains a trust fund in a qualified United Statesfinancial institution, as defined in subdivision (2) of subsection 3 of thissection, for the payment of the valid claims of its United States cedinginsurers, their assigns and successors in interest. To enable the director todetermine the sufficiency of the trust fund, the assuming insurer shall reportannually to the director information substantially the same as that requiredto be reported on the National Association of Insurance Commissioners' annualstatement form by licensed insurers. The assuming insurer shall submit toexamination of its books and records by the director.
(b) Credit for reinsurance shall not be granted pursuant to thissubdivision unless the form of the trust and any amendments to the trust havebeen approved by:
a. The commissioner or director of the state agency regulating insurancein the state where the trust is domiciled; or
b. The commissioner or director of another state who, pursuant to theterms of the trust instrument, has accepted principal regulatory oversight ofthe trust.
(c) The form of the trust and any trust amendments shall also be filedwith the commissioner or director in every state in which the ceding insurerbeneficiaries of the trust are domiciled. The trust instrument shall providethat contested claims shall be valid and enforceable upon the final order ofany court of competent jurisdiction in the United States. The trust shallvest legal title to its assets in its trustees for the benefit of the assuminginsurer's United States ceding insurers, their assigns and successors ininterest. The trust and the assuming insurer shall be subject to examinationas determined by the director.
(d) The trust shall remain in effect for as long as the assuming insurerhas outstanding obligations due under the reinsurance agreements subject tothe trust. No later than February twenty-eighth of each year the trustees ofthe trust shall report to the director in writing the balance of the trust andlisting 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 trustwill not expire prior to the next following December thirty-first.
(e) The following requirements apply to the following categories ofassuming insurers:
a. The trust fund for a single assuming insurer shall consist of fundsin trust in an amount not less than the assuming insurer's liabilitiesattributable to reinsurance ceded by the United States ceding insurers, and,in addition, the assuming insurer shall maintain a trusteed surplus of notless than twenty million dollars;
b. In the case of a group of incorporated and individual unincorporatedunderwriters:
(i) For reinsurance ceded under reinsurance agreements with aninception, amendment or renewal date on or after August 1, 1995, the trustshall consist of a trusteed account in an amount not less than the group'sseveral liabilities attributable to business ceded by United States domiciledceding insurers to any member of the group;
(ii) For reinsurance ceded under reinsurance agreements with aninception date on or before July 31, 1995, and not amended or renewed afterthat date, notwithstanding the other provisions of this section, the trustshall consist of a trustee account in an amount not less than the group'sseveral insurance and reinsurance liabilities attributable to business in theUnited States; and
(iii) In addition to these trusts, the group shall maintain in trust atrusteed surplus of which one hundred million dollars shall be held jointlyfor the benefit of the United States domiciled ceding insurers of any memberof the group for all years of account;
c. 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 regulation and solvency control by the group'sdomiciliary regulator as are the unincorporated members;
d. Within ninety days after its financial statements are due to be filedwith the group's domiciliary regulator, the group shall provide to thedirector an annual certification by the group's domiciliary regulator of thesolvency of each underwriter member; or if a certification is unavailable,financial statements, prepared by independent public accountants, of eachunderwriter member of the group;
(5) Credit:
(a) Shall be allowed when the reinsurance is ceded to an assuminginsurer not meeting the requirements of subdivision (1), (2), (3) or (4) ofthis subsection, but only as to the insurance of risks located in ajurisdiction of the United States where the reinsurance is required byapplicable law or regulation of that jurisdiction;
(b) May be allowed in the discretion of the director when thereinsurance is ceded to an assuming insurer not meeting the requirements ofsubdivision (1), (2), (3) or (4) of this subsection, but only as to theinsurance of risks located in a foreign country where the reinsurance isrequired by applicable law or regulation of that country;
(6) If the assuming insurer is not licensed or accredited to transactinsurance or reinsurance in this state, the credit permitted by subdivisions(3) and (4) of this subsection shall not be allowed unless the assuminginsurer agrees in the reinsurance agreements:
(a) That in the event of the failure of the assuming insurer to performits obligations under the terms of the reinsurance agreement, the assuminginsurer, at the request of the ceding insurer shall submit to the jurisdictionof the courts of this state, will comply with all requirements necessary togive such courts jurisdiction, and will abide by the final decisions of suchcourts or of any appellate courts in this state in the event of an appeal; and
(b) To designate the director 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. Thisparagraph is not intended to conflict with or override the obligation of theparties to a reinsurance agreement to arbitrate their disputes, if thisobligation is created in the agreement and the jurisdiction and situs of thearbitration is, with respect to any receivership of the ceding company, anyjurisdiction of the United States;
(7) If the assuming insurer does not meet the requirements ofsubdivision (1), (2) or (3) of this subsection, the credit permitted bysubdivision (4) of this subsection shall not be allowed unless the assuminginsurer agrees in the trust agreements to the following conditions:
(a) Notwithstanding any other provisions in the trust instrument, if thetrust fund is inadequate because it contains an amount less than the amountrequired by paragraph (e) of subdivision (4) of this subsection, or if thegrantor of the trust has been declared insolvent or placed into receivership,rehabilitation, liquidation or similar proceedings under the laws of its stateor country of domicile, the trustee shall comply with an order of thecommissioner or director with regulatory oversight over the trust or with anorder of a court of competent jurisdiction directing the trustee to transferto the commissioner or director with regulatory oversight all of the assets ofthe trust fund;
(b) The assets shall be distributed by and claims shall be filed withand valued by the commissioner or director with regulatory oversight inaccordance with the laws of the state in which the trust is domiciled that areapplicable to the liquidation of domestic insurance companies;
(c) If the commissioner or director with regulatory oversight determinesthat the assets of the trust fund or any part thereof are not necessary tosatisfy the claims of the United States ceding insurers of the grantor of thetrust, the assets or part thereof shall be returned by the commissioner ordirector with regulatory oversight to the trustee for distribution inaccordance with the trust agreement; and
(d) The grantor shall waive any right otherwise available to it underUnited States law that is inconsistent with this subsection.
2. An asset or reduction from liability for the reinsurance ceded by adomestic insurer to an assuming insurer not meeting the requirements ofsubsection 1 of this section shall be allowed in an amount not exceeding theliabilities carried by the ceding insurer. The reduction shall be in theamount of funds held by or on behalf of the ceding insurer, including fundsheld in trust for the ceding insurer, under a reinsurance contract with theassuming insurer as security for the payment of obligations thereunder, if thesecurity is held in the United States subject to withdrawal solely by, andunder the exclusive control of, the ceding insurer; or, in the case of atrust, held in a qualified United States financial institution, as defined insubdivision (2) of subsection 3 of this section. This security may be in theform of:
(1) Cash;
(2) Securities listed by the securities valuation office of the NationalAssociation of Insurance Commissioners and qualifying as admitted assets;
(3) (a) Clean, irrevocable, unconditional letters of credit, as definedin subdivision (1) of subsection 3 of this section, issued or confirmed by aqualified United States financial institution no later than Decemberthirty-first of the year for which filing is being made, and in the possessionof, or in trust for, the ceding company on or before the filing date of itsannual statement.
(b) Letters of credit meeting applicable standards of issueracceptability as of the dates of their issuance or confirmation,notwithstanding the issuing or confirming institution's subsequent failure tomeet applicable standards of issuer acceptability, shall continue to beacceptable as security until their expiration, extension, renewal,modification or amendment, whichever first occurs;
(4) Any other form of security acceptable to the director.
3. (1) For purposes of subdivision (3) of subsection 2 of this section,a "qualified United States financial institution" means an institution that:
(a) 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;
(b) Is regulated, supervised and examined by federal or stateauthorities having regulatory authority over banks and trust companies; and
(c) Has been determined by either the director, or the securitiesvaluation office of the National Association of Insurance Commissioners, tomeet such standards of financial condition and standing as are considerednecessary and appropriate to regulate the quality of financial institutionswhose letters of credit will be acceptable to the director.
(2) A "qualified United States financial institution" means, forpurposes of those provisions of this law specifying those institutions thatare eligible to act as a fiduciary of a trust, an institution that:
(a) Is organized, or in the case of a United States branch or agencyoffice of a foreign banking organization, licensed under the laws of theUnited States or any state thereof and has been granted authority to operatewith fiduciary powers; and
(b) Is regulated, supervised and examined by federal or stateauthorities having regulatory authority over banks and trust companies.
4. The director may adopt rules and regulations implementing theprovisions of this section.
5. (1) The director shall disallow any credit as an asset or as adeduction from liability for any reinsurance found by him to have beenarranged for the purpose principally of deception as to the ceding company'sfinancial condition as of the date of any financial statement of the company.Without limiting the general purport of this provision, reinsurance of anysubstantial part of the company's outstanding risks contracted for in factwithin four months prior to the date of any such financial statement andcanceled in fact within four months after the date of such statement, orreinsurance under which the assuming insurer bears no substantial insurancerisk or substantial risk of net loss to itself, shall prima facie be deemed tohave been arranged for the purpose principally of deception within the intentof this provision.
(2) (a) The director shall also disallow as an asset or deduction fromliability to any ceding insurer any credit for reinsurance unless thereinsurance is payable to the ceding company, and if it be insolvent to itsreceiver, by the assuming insurer on the basis of the liability of the cedingcompany under the contracts reinsured without diminution because of theinsolvency of the ceding company.
(b) Such payments shall be made directly to the ceding insurer or to itsdomiciliary liquidator except:
a. Where the contract of insurance or reinsurance specifically providesfor payment to the named insured, assignee or named beneficiary of the policyissued by the ceding insurer in the event of the insolvency of the cedinginsurer; or
b. Where the assuming insurer, with the consent of it and the directinsured or insureds in an assumption reinsurance transaction subject tosections 375.1280 to 375.1295, 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.
(c) Notwithstanding paragraphs (a) and (b) of this subdivision, in theevent that a life and health insurance guaranty association has made theelection to succeed to the rights and obligations of the insolvent insurerunder the contract of reinsurance, then the reinsurer's liability to paycovered reinsured claims shall continue under the contract of reinsurance,subject to the payment to the reinsurer of the reinsurance premiums for suchcoverage. Payment for such reinsured claims shall only be made by thereinsurer pursuant to the direction of the guaranty association or itsdesignated successor. Any payment made at the direction of the guarantyassociation or its designated successor by the reinsurer will discharge thereinsurer of all further liability to any other party for such claim payment.
(d) The reinsurance agreement may provide that the domiciliaryliquidator of an insolvent ceding insurer shall give written notice to theassuming insurer of the pendency of a claim against such ceding insurer on thecontract reinsured within a reasonable time after such claim is filed in theliquidation proceeding. During the pendency of such claim, any assuminginsurer may investigate such claim and interpose, at its own expense, in theproceeding where such claim is to be adjudicated any defenses which it deemsavailable to the ceding insurer, or its liquidator. Such expense may be filedas a claim against the insolvent ceding insurer 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. Wheretwo or more assuming insurers are involved in the same claim and a majority ininterest elect to interpose a defense to such claim, the expense shall beapportioned in accordance with the terms of the reinsurance agreement asthough such expense had been incurred by the ceding insurer.
6. To the extent that any reinsurer of an insurance company inliquidation would have been required under any agreement pertaining toreinsurance to post letters of credit or other security prior to an order ofliquidation to cover such reserves reflected upon the last financial statementfiled with a regulatory authority immediately prior to receivership, suchreinsurer shall be required to post letters of credit or other security tocover reserves after a company has been placed in liquidation or receivership. If a reinsurer shall fail to post letters of credit or other security asrequired by a reinsurance agreement or the provisions of this subsection, thedirector may consider disallowing as a credit or asset, in whole or in part,any future reinsurance ceded to such reinsurer by a ceding insurance companythat is incorporated under the laws of the state of Missouri.
7. The provisions of section 375.420 shall not apply to any action, suitor proceeding by a ceding insurer against an assuming insurer arising out of acontract of reinsurance effectuated in accordance with the laws of Missouri.
8. The provisions of this section shall become effective on January 1,2003, and shall be applicable to the financial statements of a reinsurer as ofDecember 31, 2002.
(L. 1967 p. 516, A.L. 1990 H.B. 1739, A.L. 1991 H.B. 385, et al., A.L. 1994 H.B. 1449 merged with S.B. 687, A.L. 2002 H.B. 1568, A.L. 2004 H.B. 1253 merged with S.B. 1235)
Reinsurance, when allowed as an asset or reduction from liability.
375.246. 1. Credit for reinsurance shall be allowed a domestic cedinginsurer as either an asset or a reduction from liability on account ofreinsurance ceded only when the reinsurer meets the requirements ofsubdivisions (1) to (5) of this subsection. Credit shall be allowed pursuantto subdivision (1), (2) or (3) of this subsection only as respects cessions ofthose kinds or classes of business which the assuming insurer is licensed orotherwise permitted to write or assume in its state of domicile or, in thecase of a United States branch of an alien assuming insurer, in the statethrough which it is entered and licensed to transact insurance or reinsurance. Credit shall be allowed pursuant to subdivision (3) or (4) of this subsectiononly if the applicable requirements of subdivision (6) have been satisfied.
(1) Credit shall be allowed when the reinsurance is ceded to an assuminginsurer that is licensed to transact insurance in this state;
(2) Credit shall be allowed when the reinsurance is ceded to an assuminginsurer that is accredited as a reinsurer in this state. An accreditedreinsurer is one that:
(a) Files with the director evidence of its submission to this state'sjurisdiction;
(b) Submits to the authority of the department of insurance, financialinstitutions and professional registration to examine its books and records;
(c) Is licensed to transact insurance or reinsurance in at least onestate, or in the case of a United States branch of an alien assuming insureris entered through and licensed to transact insurance or reinsurance in atleast one state;
(d) Files annually with the director a copy of its annual statementfiled with the insurance department of its state of domicile and a copy of itsmost recent audited financial statement; and
(e) Maintains a surplus as regards policyholders in an amount not lessthan twenty million dollars and whose accreditation has not been denied by thedirector within ninety days of its submission; or
(f) Maintains a surplus as regards policyholders in an amount less thantwenty million dollars and whose accreditation has been approved by thedirector.
No credit shall be allowed a domestic ceding insurer if the assuming insurer'saccreditation has been revoked by the director after notice and hearing;
(3) Credit shall be allowed when the reinsurance is ceded to an assuminginsurer that is domiciled in, or in the case of a United States branch of analien assuming insurer is entered through, a state that employs standardsregarding credit for reinsurance substantially similar to those applicableunder this statute and the assuming insurer or United States branch of analien assuming insurer:
(a) Maintains a surplus as regards policyholders in an amount not lessthan twenty million dollars; except that this paragraph does not apply toreinsurance ceded and assumed pursuant to pooling arrangements among insurersin the same holding company system; and
(b) Submits to the authority of the department of insurance, financialinstitutions and professional registration to examine its books and records;
(4) (a) Credit shall be allowed when the reinsurance is ceded to anassuming insurer that maintains a trust fund in a qualified United Statesfinancial institution, as defined in subdivision (2) of subsection 3 of thissection, for the payment of the valid claims of its United States cedinginsurers, their assigns and successors in interest. To enable the director todetermine the sufficiency of the trust fund, the assuming insurer shall reportannually to the director information substantially the same as that requiredto be reported on the National Association of Insurance Commissioners' annualstatement form by licensed insurers. The assuming insurer shall submit toexamination of its books and records by the director.
(b) Credit for reinsurance shall not be granted pursuant to thissubdivision unless the form of the trust and any amendments to the trust havebeen approved by:
a. The commissioner or director of the state agency regulating insurancein the state where the trust is domiciled; or
b. The commissioner or director of another state who, pursuant to theterms of the trust instrument, has accepted principal regulatory oversight ofthe trust.
(c) The form of the trust and any trust amendments shall also be filedwith the commissioner or director in every state in which the ceding insurerbeneficiaries of the trust are domiciled. The trust instrument shall providethat contested claims shall be valid and enforceable upon the final order ofany court of competent jurisdiction in the United States. The trust shallvest legal title to its assets in its trustees for the benefit of the assuminginsurer's United States ceding insurers, their assigns and successors ininterest. The trust and the assuming insurer shall be subject to examinationas determined by the director.
(d) The trust shall remain in effect for as long as the assuming insurerhas outstanding obligations due under the reinsurance agreements subject tothe trust. No later than February twenty-eighth of each year the trustees ofthe trust shall report to the director in writing the balance of the trust andlisting 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 trustwill not expire prior to the next following December thirty-first.
(e) The following requirements apply to the following categories ofassuming insurers:
a. The trust fund for a single assuming insurer shall consist of fundsin trust in an amount not less than the assuming insurer's liabilitiesattributable to reinsurance ceded by the United States ceding insurers, and,in addition, the assuming insurer shall maintain a trusteed surplus of notless than twenty million dollars;
b. In the case of a group of incorporated and individual unincorporatedunderwriters:
(i) For reinsurance ceded under reinsurance agreements with aninception, amendment or renewal date on or after August 1, 1995, the trustshall consist of a trusteed account in an amount not less than the group'sseveral liabilities attributable to business ceded by United States domiciledceding insurers to any member of the group;
(ii) For reinsurance ceded under reinsurance agreements with aninception date on or before July 31, 1995, and not amended or renewed afterthat date, notwithstanding the other provisions of this section, the trustshall consist of a trustee account in an amount not less than the group'sseveral insurance and reinsurance liabilities attributable to business in theUnited States; and
(iii) In addition to these trusts, the group shall maintain in trust atrusteed surplus of which one hundred million dollars shall be held jointlyfor the benefit of the United States domiciled ceding insurers of any memberof the group for all years of account;
c. 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 regulation and solvency control by the group'sdomiciliary regulator as are the unincorporated members;
d. Within ninety days after its financial statements are due to be filedwith the group's domiciliary regulator, the group shall provide to thedirector an annual certification by the group's domiciliary regulator of thesolvency of each underwriter member; or if a certification is unavailable,financial statements, prepared by independent public accountants, of eachunderwriter member of the group;
(5) Credit:
(a) Shall be allowed when the reinsurance is ceded to an assuminginsurer not meeting the requirements of subdivision (1), (2), (3) or (4) ofthis subsection, but only as to the insurance of risks located in ajurisdiction of the United States where the reinsurance is required byapplicable law or regulation of that jurisdiction;
(b) May be allowed in the discretion of the director when thereinsurance is ceded to an assuming insurer not meeting the requirements ofsubdivision (1), (2), (3) or (4) of this subsection, but only as to theinsurance of risks located in a foreign country where the reinsurance isrequired by applicable law or regulation of that country;
(6) If the assuming insurer is not licensed or accredited to transactinsurance or reinsurance in this state, the credit permitted by subdivisions(3) and (4) of this subsection shall not be allowed unless the assuminginsurer agrees in the reinsurance agreements:
(a) That in the event of the failure of the assuming insurer to performits obligations under the terms of the reinsurance agreement, the assuminginsurer, at the request of the ceding insurer shall submit to the jurisdictionof the courts of this state, will comply with all requirements necessary togive such courts jurisdiction, and will abide by the final decisions of suchcourts or of any appellate courts in this state in the event of an appeal; and
(b) To designate the director 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. Thisparagraph is not intended to conflict with or override the obligation of theparties to a reinsurance agreement to arbitrate their disputes, if thisobligation is created in the agreement and the jurisdiction and situs of thearbitration is, with respect to any receivership of the ceding company, anyjurisdiction of the United States;
(7) If the assuming insurer does not meet the requirements ofsubdivision (1), (2) or (3) of this subsection, the credit permitted bysubdivision (4) of this subsection shall not be allowed unless the assuminginsurer agrees in the trust agreements to the following conditions:
(a) Notwithstanding any other provisions in the trust instrument, if thetrust fund is inadequate because it contains an amount less than the amountrequired by paragraph (e) of subdivision (4) of this subsection, or if thegrantor of the trust has been declared insolvent or placed into receivership,rehabilitation, liquidation or similar proceedings under the laws of its stateor country of domicile, the trustee shall comply with an order of thecommissioner or director with regulatory oversight over the trust or with anorder of a court of competent jurisdiction directing the trustee to transferto the commissioner or director with regulatory oversight all of the assets ofthe trust fund;
(b) The assets shall be distributed by and claims shall be filed withand valued by the commissioner or director with regulatory oversight inaccordance with the laws of the state in which the trust is domiciled that areapplicable to the liquidation of domestic insurance companies;
(c) If the commissioner or director with regulatory oversight determinesthat the assets of the trust fund or any part thereof are not necessary tosatisfy the claims of the United States ceding insurers of the grantor of thetrust, the assets or part thereof shall be returned by the commissioner ordirector with regulatory oversight to the trustee for distribution inaccordance with the trust agreement; and
(d) The grantor shall waive any right otherwise available to it underUnited States law that is inconsistent with this subsection.
2. An asset or reduction from liability for the reinsurance ceded by adomestic insurer to an assuming insurer not meeting the requirements ofsubsection 1 of this section shall be allowed in an amount not exceeding theliabilities carried by the ceding insurer. The reduction shall be in theamount of funds held by or on behalf of the ceding insurer, including fundsheld in trust for the ceding insurer, under a reinsurance contract with theassuming insurer as security for the payment of obligations thereunder, if thesecurity is held in the United States subject to withdrawal solely by, andunder the exclusive control of, the ceding insurer; or, in the case of atrust, held in a qualified United States financial institution, as defined insubdivision (2) of subsection 3 of this section. This security may be in theform of:
(1) Cash;
(2) Securities listed by the securities valuation office of the NationalAssociation of Insurance Commissioners and qualifying as admitted assets;
(3) (a) Clean, irrevocable, unconditional letters of credit, as definedin subdivision (1) of subsection 3 of this section, issued or confirmed by aqualified United States financial institution no later than Decemberthirty-first of the year for which filing is being made, and in the possessionof, or in trust for, the ceding company on or before the filing date of itsannual statement.
(b) Letters of credit meeting applicable standards of issueracceptability as of the dates of their issuance or confirmation,notwithstanding the issuing or confirming institution's subsequent failure tomeet applicable standards of issuer acceptability, shall continue to beacceptable as security until their expiration, extension, renewal,modification or amendment, whichever first occurs;
(4) Any other form of security acceptable to the director.
3. (1) For purposes of subdivision (3) of subsection 2 of this section,a "qualified United States financial institution" means an institution that:
(a) 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;
(b) Is regulated, supervised and examined by federal or stateauthorities having regulatory authority over banks and trust companies; and
(c) Has been determined by either the director, or the securitiesvaluation office of the National Association of Insurance Commissioners, tomeet such standards of financial condition and standing as are considerednecessary and appropriate to regulate the quality of financial institutionswhose letters of credit will be acceptable to the director.
(2) A "qualified United States financial institution" means, forpurposes of those provisions of this law specifying those institutions thatare eligible to act as a fiduciary of a trust, an institution that:
(a) Is organized, or in the case of a United States branch or agencyoffice of a foreign banking organization, licensed under the laws of theUnited States or any state thereof and has been granted authority to operatewith fiduciary powers; and
(b) Is regulated, supervised and examined by federal or stateauthorities having regulatory authority over banks and trust companies.
4. The director may adopt rules and regulations implementing theprovisions of this section.
5. (1) The director shall disallow any credit as an asset or as adeduction from liability for any reinsurance found by him to have beenarranged for the purpose principally of deception as to the ceding company'sfinancial condition as of the date of any financial statement of the company.Without limiting the general purport of this provision, reinsurance of anysubstantial part of the company's outstanding risks contracted for in factwithin four months prior to the date of any such financial statement andcanceled in fact within four months after the date of such statement, orreinsurance under which the assuming insurer bears no substantial insurancerisk or substantial risk of net loss to itself, shall prima facie be deemed tohave been arranged for the purpose principally of deception within the intentof this provision.
(2) (a) The director shall also disallow as an asset or deduction fromliability to any ceding insurer any credit for reinsurance unless thereinsurance is payable to the ceding company, and if it be insolvent to itsreceiver, by the assuming insurer on the basis of the liability of the cedingcompany under the contracts reinsured without diminution because of theinsolvency of the ceding company.
(b) Such payments shall be made directly to the ceding insurer or to itsdomiciliary liquidator except:
a. Where the contract of insurance or reinsurance specifically providesfor payment to the named insured, assignee or named beneficiary of the policyissued by the ceding insurer in the event of the insolvency of the cedinginsurer; or
b. Where the assuming insurer, with the consent of it and the directinsured or insureds in an assumption reinsurance transaction subject tosections 375.1280 to 375.1295, 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.
(c) Notwithstanding paragraphs (a) and (b) of this subdivision, in theevent that a life and health insurance guaranty association has made theelection to succeed to the rights and obligations of the insolvent insurerunder the contract of reinsurance, then the reinsurer's liability to paycovered reinsured claims shall continue under the contract of reinsurance,subject to the payment to the reinsurer of the reinsurance premiums for suchcoverage. Payment for such reinsured claims shall only be made by thereinsurer pursuant to the direction of the guaranty association or itsdesignated successor. Any payment made at the direction of the guarantyassociation or its designated successor by the reinsurer will discharge thereinsurer of all further liability to any other party for such claim payment.
(d) The reinsurance agreement may provide that the domiciliaryliquidator of an insolvent ceding insurer shall give written notice to theassuming insurer of the pendency of a claim against such ceding insurer on thecontract reinsured within a reasonable time after such claim is filed in theliquidation proceeding. During the pendency of such claim, any assuminginsurer may investigate such claim and interpose, at its own expense, in theproceeding where such claim is to be adjudicated any defenses which it deemsavailable to the ceding insurer, or its liquidator. Such expense may be filedas a claim against the insolvent ceding insurer 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. Wheretwo or more assuming insurers are involved in the same claim and a majority ininterest elect to interpose a defense to such claim, the expense shall beapportioned in accordance with the terms of the reinsurance agreement asthough such expense had been incurred by the ceding insurer.
6. To the extent that any reinsurer of an insurance company inliquidation would have been required under any agreement pertaining toreinsurance to post letters of credit or other security prior to an order ofliquidation to cover such reserves reflected upon the last financial statementfiled with a regulatory authority immediately prior to receivership, suchreinsurer shall be required to post letters of credit or other security tocover reserves after a company has been placed in liquidation or receivership. If a reinsurer shall fail to post letters of credit or other security asrequired by a reinsurance agreement or the provisions of this subsection, thedirector may consider disallowing as a credit or asset, in whole or in part,any future reinsurance ceded to such reinsurer by a ceding insurance companythat is incorporated under the laws of the state of Missouri.
7. The provisions of section 375.420 shall not apply to any action, suitor proceeding by a ceding insurer against an assuming insurer arising out of acontract of reinsurance effectuated in accordance with the laws of Missouri.
8. The provisions of this section shall become effective on January 1,2003, and shall be applicable to the financial statements of a reinsurer as ofDecember 31, 2002.
(L. 1967 p. 516, A.L. 1990 H.B. 1739, A.L. 1991 H.B. 385, et al., A.L. 1994 H.B. 1449 merged with S.B. 687, A.L. 2002 H.B. 1568, A.L. 2004 H.B. 1253 merged with S.B. 1235)
Reinsurance, when allowed as an asset or reduction from liability.
375.246. 1. Credit for reinsurance shall be allowed a domestic cedinginsurer as either an asset or a reduction from liability on account ofreinsurance ceded only when the reinsurer meets the requirements ofsubdivisions (1) to (5) of this subsection. Credit shall be allowed pursuantto subdivision (1), (2) or (3) of this subsection only as respects cessions ofthose kinds or classes of business which the assuming insurer is licensed orotherwise permitted to write or assume in its state of domicile or, in thecase of a United States branch of an alien assuming insurer, in the statethrough which it is entered and licensed to transact insurance or reinsurance. Credit shall be allowed pursuant to subdivision (3) or (4) of this subsectiononly if the applicable requirements of subdivision (6) have been satisfied.
(1) Credit shall be allowed when the reinsurance is ceded to an assuminginsurer that is licensed to transact insurance in this state;
(2) Credit shall be allowed when the reinsurance is ceded to an assuminginsurer that is accredited as a reinsurer in this state. An accreditedreinsurer is one that:
(a) Files with the director evidence of its submission to this state'sjurisdiction;
(b) Submits to the authority of the department of insurance, financialinstitutions and professional registration to examine its books and records;
(c) Is licensed to transact insurance or reinsurance in at least onestate, or in the case of a United States branch of an alien assuming insureris entered through and licensed to transact insurance or reinsurance in atleast one state;
(d) Files annually with the director a copy of its annual statementfiled with the insurance department of its state of domicile and a copy of itsmost recent audited financial statement; and
(e) Maintains a surplus as regards policyholders in an amount not lessthan twenty million dollars and whose accreditation has not been denied by thedirector within ninety days of its submission; or
(f) Maintains a surplus as regards policyholders in an amount less thantwenty million dollars and whose accreditation has been approved by thedirector.
No credit shall be allowed a domestic ceding insurer if the assuming insurer'saccreditation has been revoked by the director after notice and hearing;
(3) Credit shall be allowed when the reinsurance is ceded to an assuminginsurer that is domiciled in, or in the case of a United States branch of analien assuming insurer is entered through, a state that employs standardsregarding credit for reinsurance substantially similar to those applicableunder this statute and the assuming insurer or United States branch of analien assuming insurer:
(a) Maintains a surplus as regards policyholders in an amount not lessthan twenty million dollars; except that this paragraph does not apply toreinsurance ceded and assumed pursuant to pooling arrangements among insurersin the same holding company system; and
(b) Submits to the authority of the department of insurance, financialinstitutions and professional registration to examine its books and records;
(4) (a) Credit shall be allowed when the reinsurance is ceded to anassuming insurer that maintains a trust fund in a qualified United Statesfinancial institution, as defined in subdivision (2) of subsection 3 of thissection, for the payment of the valid claims of its United States cedinginsurers, their assigns and successors in interest. To enable the director todetermine the sufficiency of the trust fund, the assuming insurer shall reportannually to the director information substantially the same as that requiredto be reported on the National Association of Insurance Commissioners' annualstatement form by licensed insurers. The assuming insurer shall submit toexamination of its books and records by the director.
(b) Credit for reinsurance shall not be granted pursuant to thissubdivision unless the form of the trust and any amendments to the trust havebeen approved by:
a. The commissioner or director of the state agency regulating insurancein the state where the trust is domiciled; or
b. The commissioner or director of another state who, pursuant to theterms of the trust instrument, has accepted principal regulatory oversight ofthe trust.
(c) The form of the trust and any trust amendments shall also be filedwith the commissioner or director in every state in which the ceding insurerbeneficiaries of the trust are domiciled. The trust instrument shall providethat contested claims shall be valid and enforceable upon the final order ofany court of competent jurisdiction in the United States. The trust shallvest legal title to its assets in its trustees for the benefit of the assuminginsurer's United States ceding insurers, their assigns and successors ininterest. The trust and the assuming insurer shall be subject to examinationas determined by the director.
(d) The trust shall remain in effect for as long as the assuming insurerhas outstanding obligations due under the reinsurance agreements subject tothe trust. No later than February twenty-eighth of each year the trustees ofthe trust shall report to the director in writing the balance of the trust andlisting 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 trustwill not expire prior to the next following December thirty-first.
(e) The following requirements apply to the following categories ofassuming insurers:
a. The trust fund for a single assuming insurer shall consist of fundsin trust in an amount not less than the assuming insurer's liabilitiesattributable to reinsurance ceded by the United States ceding insurers, and,in addition, the assuming insurer shall maintain a trusteed surplus of notless than twenty million dollars;
b. In the case of a group of incorporated and individual unincorporatedunderwriters:
(i) For reinsurance ceded under reinsurance agreements with aninception, amendment or renewal date on or after August 1, 1995, the trustshall consist of a trusteed account in an amount not less than the group'sseveral liabilities attributable to business ceded by United States domiciledceding insurers to any member of the group;
(ii) For reinsurance ceded under reinsurance agreements with aninception date on or before July 31, 1995, and not amended or renewed afterthat date, notwithstanding the other provisions of this section, the trustshall consist of a trustee account in an amount not less than the group'sseveral insurance and reinsurance liabilities attributable to business in theUnited States; and
(iii) In addition to these trusts, the group shall maintain in trust atrusteed surplus of which one hundred million dollars shall be held jointlyfor the benefit of the United States domiciled ceding insurers of any memberof the group for all years of account;
c. 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 regulation and solvency control by the group'sdomiciliary regulator as are the unincorporated members;
d. Within ninety days after its financial statements are due to be filedwith the group's domiciliary regulator, the group shall provide to thedirector an annual certification by the group's domiciliary regulator of thesolvency of each underwriter member; or if a certification is unavailable,financial statements, prepared by independent public accountants, of eachunderwriter member of the group;
(5) Credit:
(a) Shall be allowed when the reinsurance is ceded to an assuminginsurer not meeting the requirements of subdivision (1), (2), (3) or (4) ofthis subsection, but only as to the insurance of risks located in ajurisdiction of the United States where the reinsurance is required byapplicable law or regulation of that jurisdiction;
(b) May be allowed in the discretion of the director when thereinsurance is ceded to an assuming insurer not meeting the requirements ofsubdivision (1), (2), (3) or (4) of this subsection, but only as to theinsurance of risks located in a foreign country where the reinsurance isrequired by applicable law or regulation of that country;
(6) If the assuming insurer is not licensed or accredited to transactinsurance or reinsurance in this state, the credit permitted by subdivisions(3) and (4) of this subsection shall not be allowed unless the assuminginsurer agrees in the reinsurance agreements:
(a) That in the event of the failure of the assuming insurer to performits obligations under the terms of the reinsurance agreement, the assuminginsurer, at the request of the ceding insurer shall submit to the jurisdictionof the courts of this state, will comply with all requirements necessary togive such courts jurisdiction, and will abide by the final decisions of suchcourts or of any appellate courts in this state in the event of an appeal; and
(b) To designate the director 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. Thisparagraph is not intended to conflict with or override the obligation of theparties to a reinsurance agreement to arbitrate their disputes, if thisobligation is created in the agreement and the jurisdiction and situs of thearbitration is, with respect to any receivership of the ceding company, anyjurisdiction of the United States;
(7) If the assuming insurer does not meet the requirements ofsubdivision (1), (2) or (3) of this subsection, the credit permitted bysubdivision (4) of this subsection shall not be allowed unless the assuminginsurer agrees in the trust agreements to the following conditions:
(a) Notwithstanding any other provisions in the trust instrument, if thetrust fund is inadequate because it contains an amount less than the amountrequired by paragraph (e) of subdivision (4) of this subsection, or if thegrantor of the trust has been declared insolvent or placed into receivership,rehabilitation, liquidation or similar proceedings under the laws of its stateor country of domicile, the trustee shall comply with an order of thecommissioner or director with regulatory oversight over the trust or with anorder of a court of competent jurisdiction directing the trustee to transferto the commissioner or director with regulatory oversight all of the assets ofthe trust fund;
(b) The assets shall be distributed by and claims shall be filed withand valued by the commissioner or director with regulatory oversight inaccordance with the laws of the state in which the trust is domiciled that areapplicable to the liquidation of domestic insurance companies;
(c) If the commissioner or director with regulatory oversight determinesthat the assets of the trust fund or any part thereof are not necessary tosatisfy the claims of the United States ceding insurers of the grantor of thetrust, the assets or part thereof shall be returned by the commissioner ordirector with regulatory oversight to the trustee for distribution inaccordance with the trust agreement; and
(d) The grantor shall waive any right otherwise available to it underUnited States law that is inconsistent with this subsection.
2. An asset or reduction from liability for the reinsurance ceded by adomestic insurer to an assuming insurer not meeting the requirements ofsubsection 1 of this section shall be allowed in an amount not exceeding theliabilities carried by the ceding insurer. The reduction shall be in theamount of funds held by or on behalf of the ceding insurer, including fundsheld in trust for the ceding insurer, under a reinsurance contract with theassuming insurer as security for the payment of obligations thereunder, if thesecurity is held in the United States subject to withdrawal solely by, andunder the exclusive control of, the ceding insurer; or, in the case of atrust, held in a qualified United States financial institution, as defined insubdivision (2) of subsection 3 of this section. This security may be in theform of:
(1) Cash;
(2) Securities listed by the securities valuation office of the NationalAssociation of Insurance Commissioners and qualifying as admitted assets;
(3) (a) Clean, irrevocable, unconditional letters of credit, as definedin subdivision (1) of subsection 3 of this section, issued or confirmed by aqualified United States financial institution no later than Decemberthirty-first of the year for which filing is being made, and in the possessionof, or in trust for, the ceding company on or before the filing date of itsannual statement.
(b) Letters of credit meeting applicable standards of issueracceptability as of the dates of their issuance or confirmation,notwithstanding the issuing or confirming institution's subsequent failure tomeet applicable standards of issuer acceptability, shall continue to beacceptable as security until their expiration, extension, renewal,modification or amendment, whichever first occurs;
(4) Any other form of security acceptable to the director.
3. (1) For purposes of subdivision (3) of subsection 2 of this section,a "qualified United States financial institution" means an institution that:
(a) 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;
(b) Is regulated, supervised and examined by federal or stateauthorities having regulatory authority over banks and trust companies; and
(c) Has been determined by either the director, or the securitiesvaluation office of the National Association of Insurance Commissioners, tomeet such standards of financial condition and standing as are considerednecessary and appropriate to regulate the quality of financial institutionswhose letters of credit will be acceptable to the director.
(2) A "qualified United States financial institution" means, forpurposes of those provisions of this law specifying those institutions thatare eligible to act as a fiduciary of a trust, an institution that:
(a) Is organized, or in the case of a United States branch or agencyoffice of a foreign banking organization, licensed under the laws of theUnited States or any state thereof and has been granted authority to operatewith fiduciary powers; and
(b) Is regulated, supervised and examined by federal or stateauthorities having regulatory authority over banks and trust companies.
4. The director may adopt rules and regulations implementing theprovisions of this section.
5. (1) The director shall disallow any credit as an asset or as adeduction from liability for any reinsurance found by him to have beenarranged for the purpose principally of deception as to the ceding company'sfinancial condition as of the date of any financial statement of the company.Without limiting the general purport of this provision, reinsurance of anysubstantial part of the company's outstanding risks contracted for in factwithin four months prior to the date of any such financial statement andcanceled in fact within four months after the date of such statement, orreinsurance under which the assuming insurer bears no substantial insurancerisk or substantial risk of net loss to itself, shall prima facie be deemed tohave been arranged for the purpose principally of deception within the intentof this provision.
(2) (a) The director shall also disallow as an asset or deduction fromliability to any ceding insurer any credit for reinsurance unless thereinsurance is payable to the ceding company, and if it be insolvent to itsreceiver, by the assuming insurer on the basis of the liability of the cedingcompany under the contracts reinsured without diminution because of theinsolvency of the ceding company.
(b) Such payments shall be made directly to the ceding insurer or to itsdomiciliary liquidator except:
a. Where the contract of insurance or reinsurance specifically providesfor payment to the named insured, assignee or named beneficiary of the policyissued by the ceding insurer in the event of the insolvency of the cedinginsurer; or
b. Where the assuming insurer, with the consent of it and the directinsured or insureds in an assumption reinsurance transaction subject tosections 375.1280 to 375.1295, 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.
(c) Notwithstanding paragraphs (a) and (b) of this subdivision, in theevent that a life and health insurance guaranty association has made theelection to succeed to the rights and obligations of the insolvent insurerunder the contract of reinsurance, then the reinsurer's liability to paycovered reinsured claims shall continue under the contract of reinsurance,subject to the payment to the reinsurer of the reinsurance premiums for suchcoverage. Payment for such reinsured claims shall only be made by thereinsurer pursuant to the direction of the guaranty association or itsdesignated successor. Any payment made at the direction of the guarantyassociation or its designated successor by the reinsurer will discharge thereinsurer of all further liability to any other party for such claim payment.
(d) The reinsurance agreement may provide that the domiciliaryliquidator of an insolvent ceding insurer shall give written notice to theassuming insurer of the pendency of a claim against such ceding insurer on thecontract reinsured within a reasonable time after such claim is filed in theliquidation proceeding. During the pendency of such claim, any assuminginsurer may investigate such claim and interpose, at its own expense, in theproceeding where such claim is to be adjudicated any defenses which it deemsavailable to the ceding insurer, or its liquidator. Such expense may be filedas a claim against the insolvent ceding insurer 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. Wheretwo or more assuming insurers are involved in the same claim and a majority ininterest elect to interpose a defense to such claim, the expense shall beapportioned in accordance with the terms of the reinsurance agreement asthough such expense had been incurred by the ceding insurer.
6. To the extent that any reinsurer of an insurance company inliquidation would have been required under any agreement pertaining toreinsurance to post letters of credit or other security prior to an order ofliquidation to cover such reserves reflected upon the last financial statementfiled with a regulatory authority immediately prior to receivership, suchreinsurer shall be required to post letters of credit or other security tocover reserves after a company has been placed in liquidation or receivership. If a reinsurer shall fail to post letters of credit or other security asrequired by a reinsurance agreement or the provisions of this subsection, thedirector may consider disallowing as a credit or asset, in whole or in part,any future reinsurance ceded to such reinsurer by a ceding insurance companythat is incorporated under the laws of the state of Missouri.
7. The provisions of section 375.420 shall not apply to any action, suitor proceeding by a ceding insurer against an assuming insurer arising out of acontract of reinsurance effectuated in accordance with the laws of Missouri.
8. The provisions of this section shall become effective on January 1,2003, and shall be applicable to the financial statements of a reinsurer as ofDecember 31, 2002.
(L. 1967 p. 516, A.L. 1990 H.B. 1739, A.L. 1991 H.B. 385, et al., A.L. 1994 H.B. 1449 merged with S.B. 687, A.L. 2002 H.B. 1568, A.L. 2004 H.B. 1253 merged with S.B. 1235)
