Current through February 24, 2025
(a) The director
shall allow credit for reinsurance ceded by a domestic insurer to an authorized
assuming insurer that maintains a trust fund on or before the as of date of the
ceding insurer's statutory financial statement. The director shall allow this
credit for as long as credit for reinsurance is claimed by the domestic insurer
and the trust fund is maintained in an amount and location as required under
AS
21.12.020(a)(4). The
assuming insurer shall report annually to the director substantially the same
information as that required to be reported on the National Association of
Insurance Commissioners annual statement form by licensed insurers, to enable
the director to determine the sufficiency of the trust fund.
(b) The trust fund for a single assuming
insurer shall consist of funds in trust in an amount not less than the assuming
insurer's liabilities attributable to reinsurance ceded by United States
domiciled insurers. In addition, the assuming insurer shall maintain a trusteed
surplus of not less than $20,000,000, except as provided in (c) of this
section.
(c) At any time after the
assuming insurer has permanently discontinued underwriting new business secured
by the trust for at least three full years the insurance regulatory official
with principal regulatory oversight of the trust may authorize a reduction in
the required trusteed surplus, but only after a finding, based on an assessment
of the risk, that the new required surplus level is adequate for the protection
of United States ceding insurers, policyholders, and claimants in light of
reasonably foreseeable adverse loss development. The risk assessment may
involve an actuarial review, including an independent analysis of reserves and
cash flows, and shall consider all material risk factors, including when
applicable the lines of business involved, the stability of the incurred loss
estimates and the effect of the surplus requirements on the assuming insurer's
liquidity or solvency. The minimum required trusteed surplus may not be reduced
to an amount less than 30 percent of the assuming insurer's liabilities
attributable to reinsurance ceded by United States ceding insurers covered by
the trust.
(d) The trust fund for a
group including incorporated and individual unincorporated underwriters shall
consist of:
(1) for reinsurance ceded under
reinsurance agreements with an inception, amendment, or renewal date on or
after January 1, 1993, funds in trust in an amount not less than the respective
underwriters' several liabilities attributable to business ceded by United
States domiciled ceding insurers to any underwriter of the group;
(2) for reinsurance ceded under reinsurance
agreements with an inception date on or before December 31, 1992, and not
amended or renewed after that date, notwithstanding the other provisions of
this regulation, funds in trust in an amount not less than the respective
underwriters' several insurance and reinsurance liabilities attributable to
business written in the United States; and
(3) in addition to these trusts, the group
shall maintain a trusteed surplus of which $100,000,000 shall be held jointly
for the benefit of the United States domiciled ceding insurers of any member of
the group for all the years of account.
(e) The incorporated members of a group may
not be engaged in any business other than underwriting as a member of the group
and shall be subject to the same level of regulation and solvency control by
the group's domiciliary regulator as are the unincorporated members. The group
shall, not later than 90 days after its financial statements are due to be
filed with the group's domiciliary regulator, provide to the direction
(1) an annual certification by the group's
domiciliary regulator of the solvency of each underwriter member of the group;
or
(2) if a certification is
unavailable, a financial statement, prepared by independent public accountants,
of each underwriter member of the group.
(f) The trust fund for a group of
incorporated insurers under common administration, whose members possess
aggregate policyholders surplus of $10,000,000,000, calculated and reported in
substantially the same manner as prescribed by the annual statement
instructions and Accounting Practices and Procedures Manual of
the National Association of Insurance Commissioners, and which has continuously
transacted an insurance business outside the United States for at least three
years immediately prior to making application for accreditation, shall
(1) consist of funds in trust in an amount
not less than the assuming insurers' several liabilities attributable to
business ceded by United States domiciled ceding insurers to any members of the
group pursuant to reinsurance contracts issued in the name of such
group;
(2) maintain a joint
trusteed surplus of which $100,000,000 shall be held jointly for the benefit of
United States domiciled ceding insurers of any member of the group;
(3) file a properly executed Form AR-1 as
evidence of the submission to this state's authority to examine the books and
records of any of its members and shall certify that any member examined will
bear the expense of any such examination; and
(4) not later than 90 days after the
statements are due to be filed with the group's domiciliary regulator, the
group shall file with the director an annual certification of each underwriter
member's solvency by the member's domiciliary regulators, and financial
statements, prepared by independent public accountants, of each underwriter
member of the group.
(g)
Credit for reinsurance may not be granted unless the form of the trust and any
amendments to the trust have been approved by either the insurance regulatory
official of the state where the trust is domiciled or the insurance regulatory
official of another state who, pursuant to the terms of the trust instrument,
has accepted responsibility for regulatory oversight of the trust. The form of
the trust and any trust amendments must be filed with the director of every
state in which the ceding insurer beneficiaries of the trust are domiciled. The
trust instrument must provide that
(1)
contested claims shall be valid and enforceable out of funds in trust to the
extent remaining unsatisfied 30 days after entry of the final order of any
court of competent jurisdiction in the United States;
(2) legal title to the assets of the trust
shall be vested in the trustee for the benefit of the grantor's United States
ceding insurers, their assigns, and successors in interest;
(3) the trust shall be subject to examination
as determined by the director;
(4)
the trust shall remain in effect for as long as the assuming insurer, or any
member or former member of a group of insurers, shall have outstanding
obligations under reinsurance agreements subject to the trust; and
(5) no later than February 28 of each year
the trustee of the trust shall report to the director in writing setting forth
the balance in the trust and listing the trust's investments at the preceding
year-end, and shall certify the date of termination of the trust, if so
planned, or certify "that the trust will not expire prior to the following
December 31.
(h)
Notwithstanding any other provisions in the trust instrument, if the trust fund
is inadequate because it contains an amount less than the amount required by
this section or if the grantor of the trust has been declared insolvent or
placed into receivership, rehabilitation, liquidation, or similar proceedings
under the laws of its state or country of domicile, the trustee shall comply
with an order of the insurance regulatory official with regulatory oversight
over the trust or with an order of a court of competent jurisdiction directing
the trustee to transfer to the insurance regulatory official with regulatory
oversight over the trust or other designated receiver all of the assets of the
trust fund. The assets shall be distributed by and claims shall be filed with
and valued by the insurance regulatory official with regulatory oversight over
the trust in accordance with the laws of the state in which the trust is
domiciled applicable to the liquidation of domestic insurance companies. If the
insurance regulatory official with regulatory oversight over the trust
determines that the assets of the trust fund or any part thereof are not
necessary to satisfy the claims of the United States beneficiaries of the
trust, the director with regulatory oversight over the trust shall return the
assets, or any part thereof, to the trustee for distribution in accordance with
the trust agreement. The grantor shall waive any right otherwise available to
it under United States law that is inconsistent with this provision.
(i) Assets deposited in a trust fund
established by an authorized assuming insurer must be valued according to fair
market value and may only consist of
(1) cash
in United States dollars;
(2)
certificates of deposit issued by a qualified United States financial
institution;
(3) clean,
irrevocable, unconditional letters of credit containing an evergreen clause,
issued or confirmed by a qualified United States financial institution;
or
(4) investments of a type
specified in (k) of this section.
(j) An investment in or issued by an entity
controlling, controlled by, or under common control with either the grantor or
beneficiary of the trust fund must not exceed five percent of the total of the
trust fund. Not more than 20 percent of the total of the trust fund may be in
foreign investments authorized in this section, and not more than 10 percent of
the total of the trust fund may be in securities denominated in foreign
currencies. A depository receipt denominated in United States dollars and
representing rights conferred by a foreign security is classified as a foreign
investment denominated in a foreign currency.
(k) The trust fund established by an
authorized assuming insurer must only contain the following
(1) a valid and legally authorized government
obligation that is not in default as to principal or interest that is issued,
assumed, or guaranteed by
(A) the United
States or by any agency or instrumentality of the United States;
(B) a state of the United States;
(C) a territory, possession, or other
governmental unit of the United States;
(D) an agency or instrumentality of a
governmental unit referred to in (B) or (C) of this paragraph, if the
obligation is payable by law, as to both principal and interest, from taxes
levied or required by law to be levied, or from adequate special revenues
pledged or otherwise appropriated, or required by law to be provided for making
these payments; the obligation may not be an obligation eligible for investment
under this paragraph if the obligation is payable solely out of a special
assessment on properties benefited by local improvements; or
(E) the government of any other country that
is a member of the Organization for Economic Cooperation and Development and
whose government obligations are rated high grade investments or the equivalent
by a rating agency recognized by the Securities Valuation Office of the
National Association of Insurance Commissioners;
(2) an obligation that
(A) is issued in the United States by a
solvent United States institution, other than an insurance company, or that is
assumed or guaranteed by that institution; or a non-United States market by a
solvent United States institution, other than an insurance company, and that is
dollar-denominated;
(B) is not in
default as to principal or interest; and
(C) either
(i) is rated a high-grade investment or the
equivalent by a rating agency recognized by the securities valuation office or,
if not rated, is similar in structure and other material respects to other
obligations of the same institution that are rated equivalent to a high-grade
investment; or
(ii) is insured by
at least one authorized insurer that is licensed to insure obligations in this
state if, after considering the insurance, a rating agency recognized by the
securities valuation office rates the obligation a high-grade investment or the
equivalent; for purposes of this sub-subparagraph, an authorized insurer may
not be the investing insurer or a parent, subsidiary, or affiliate of the
investing insurer; or
(iii) has
been designated as Class One or Class Two by the Securities Valuation Office of
the National Association of Insurance Commissioners;
(3) an obligation issued, assumed,
or guaranteed by a solvent non-United States institution chartered in a country
that is a member of the Organization for Economic Cooperation and Development
or obligations of United States corporations issued in a non-United States
currency, provided that in either case the obligations are rated A or higher,
or the equivalent, by a rating agency recognized by the Securities Valuation
Office of the National Association of Insurance Commissioners;
(4) an equity investment in common shares or
a partnership interest as described in (A) or (B) of this paragraph, if the
investment in, or loan upon, any one institution's outstanding equity interests
does not exceed one percent of the assets of the trust fund, or if the cost of
the investment in equity interest made under this paragraph, when added to the
aggregate cost of other investments in equity interest then held under this
paragraph, does not exceed 10 percent of the assets of the trust fund; the
equity investment may be made in
(A) a
solvent United States institution if the
(i)
obligation and preferred shares of the institution, if any, are eligible as
investments under this subsection; and
(ii) equity interests of the institution,
except an insurance company, are registered on a national securities exchange
registered under 15 U.S.C.
78e -
78f, sees. 5-6 of the Securities
Act of 1934, and price quotations are furnished through a nationwide automated
quotations system approved by the Securities and Exchange Commission or the
National Association of Securities Dealers; or
(B) a solvent institution organized under the
laws of a member country of the Organization for Economic Cooperation and
Development if the
(i) obligation is rated a
high-grade investment or the equivalent by a rating agency recognized by the
Securities Valuation Office of the National Association of Insurance
Commissioners; and
(ii) equity
interests of the institution are registered on a securities exchange regulated
by the government of a member country of the Organization for Economic
Cooperation and Development;
(5) if a high-grade investment obligation or
the equivalent by a rating agency recognized by the securities valuation
office, an obligation issued, assumed, or guaranteed by a multinational
development bank; for purposes of this paragraph, "multinational development
bank" includes
(A) International Bank for
Reconstruction and Development;
(B)
European Bank for Reconstruction and Development;
(C) Inter-American Development
Bank;
(D) Asian Development
Bank;
(E) African Development Bank;
and
(F) International Finance
Corporation;
(6) a
security of an investment company registered under
1 5 U.S.C. 80a-1 -
80a-64, Investment Company Act of
1940, if the
(A) investment company invests
at least 90 percent of its assets in the types of securities that qualify as an
investment
(i) under (1), (2), or (3) of this
subsection or invests in securities that are determined by the director to be
substantially similar; or
(ii)
under (4)(A) of this subsection; and
(B) total investment in securities qualifying
(i) under (A)(i) of this paragraph does not
exceed 10 percent of the assets of the trust fund and the total investment in
qualifying investment companies does not exceed 25 percent of the assets of the
trust fund; and
(ii) under (A)(ii)
of this paragraph does not exceed five percent of the assets of the trust fund
and the total investment in qualifying investment companies are included when
calculating the permissible aggregate value of equity interests under (4)(A) of
this subsection; or
(7) a letter of credit that has the right and
obligation of the trustee in a binding agreement, as approved by the director,
to immediately draw down the full amount of the letter of credit and hold the
proceeds in trust for the beneficiary of the trust fund if the letter of credit
will otherwise expire without being renewed or replaced.
(l) An investment made under (k)(1), (2), or
(3) of this section may not exceed
(1) five
percent of the trust fund for the total of investments in or loans upon the
obligations of an institution other than an institution that issues
mortgage-related securities;
(2)
five percent of the trust fund for an investment in any one mortgage-related
security;
(3) 25 percent of the
trust fund for the total of investments in mortgage-related security;
or
(4) two percent of the trust
fund for preferred or guaranteed shares issued or guaranteed by a solvent
United States institution; in addition, an investment in preferred or
guaranteed shares issued or guaranteed by a solvent United States institution
is permitted only if all obligations of the institution are eligible as
investments under (k)(2)(C)(i) or (iii) of this section.
(m) As used in this section:
(1) "mortgage-related security" means an
obligation that is rated AA or higher, or the equivalent, by a securities
rating agency recognized by the Securities Valuation Office of the National
Association of Insurance Commissioners and that either
(A) represents ownership of one or more
promissory notes or certificates of interest or participation in the notes,
including any rights designed to assure servicing of, or the receipt or
timeliness of receipt by the holders of the notes, certificates, or
participation of amounts payable under, the notes, certificates, or
participation, that
(i) are directly secured
by a first lien on a single parcel of real estate, including stock allocated to
a dwelling unit in a residential cooperative housing corporation, upon which is
located a dwelling or mixed residential and commercial structure, or on a
residential manufactured home as defined in
42 U.S.C. Section
5402(6), whether the
manufactured home is considered real or personal property under the laws of the
state in which it is located; and
(ii) were originated by a savings and loan
association, savings bank, commercial bank, credit union, insurance company, or
similar institution that is supervised and examined by a federal or state
housing authority, or by a mortgagee approved by the Secretary of Housing and
Urban Development under 12
U.S.C. sections 1709 and
1715 -b, or, where the notes
involve a lien on the manufactured home, by an institution or by a financial
institution approved for insurance by the Secretary of Housing and Urban
Development pursuant to 12
U.S.C section 1703; or
(B) is secured by one or more promissory
notes, certificates of deposit or participations in the notes, with or without
recourse to the insurer of the notes, and, by its terms, provides for payments
of principal in relation to payments, or reasonable projections of payments, or
notes meeting the requirements of items (A)(i) and (A)(ii) of this
subsection;
(2)
"promissory note," when used in connection with a manufactured home, include a
loan an advance or a credit sale as evidenced by a retail installment sales
contract or other instrument.
Authority:AS
21.06.090
AS
21.12.020
