(a) In addition to
meeting the requirements under
3
AAC 21.665, a trust agreement for a trust fund
maintained by an unauthorized assuming insurer may provide that
(1) the trustee may resign upon delivery of a
written notice of resignation, effective not less than 90 days after the notice
is received by the beneficiary and grantor, or the trustee may be removed by
the grantor upon delivery of a written notice of removal, effective not less
than 90 days after the notice is received by the trustee and the beneficiary,
but a resignation or removal under this paragraph may not be effective until a
successor trustee has been approved and duly appointed by the beneficiary and
the grantor and all assets in the trust fund have been duly transferred to the
new trustee;
(2) the beneficiary
may at any time designate a party to whom all or part of the trust assets are
to be transferred; the transfer may be conditioned upon the trustee receiving,
before or simultaneously with the transfer, other specified assets;
(3) before depositing an asset with the
trustee, the grantor must execute an assignment or endorsement in blank or
transfer legal title to the trustee of each share, obligation, or other asset
requiring assignment, so the beneficiary or the trustee, upon the direction of
the beneficiary, may negotiate the asset without further consent or signature
of the grantor or any other entity;
(4) all assets not previously withdrawn by
the beneficiary, upon termination of the trust fund and written approval of the
beneficiary, will be delivered to the grantor; and
(5) specific types of investments allowed by
law are to be deposited in the trust fund.
(b) If a trust agreement, for a trust fund
maintained by an unauthorized assuming insurer, is established in conjunction
with a reinsurance agreement that covers risks other than life, annuity, or
health, and it is customary to provide a trust agreement for a specific
purpose, the trust agreement may provide that a beneficiary must undertake to
use and apply amounts drawn upon the trust, without diminution because of
insolvency of the beneficiary or the grantor, for the purpose of
(1) payment or reimbursement to the
beneficiary for the grantor's share under the reinsurance agreement regarding a
loss or allocated loss expense paid by the beneficiary but not recovered from
the grantor, or for unearned premium due to the beneficiary if not otherwise
paid by the grantor;
(2) payment to
the grantor of any amount held in the trust that exceeds 102 percent of the
actual amount required to fund the grantor's obligation under the reinsurance
agreement; or
(3) withdrawing an
amount equal to the obligation and depositing that amount in a separate account
in the name of the beneficiary in a qualified United States financial
institution in trust for a purpose listed in (1) or (2) of this subsection, if
the beneficiary has received notification of termination of the trust fund and
if the grantor's obligation under the reinsurance agreement remains
unliquidated and undischarged 10 days before the termination date.
(c) If a trust agreement, for a
trust fund maintained by an unauthorized assuming insurer, is established in
conjunction with a reinsurance agreement that covers life, annuity, or health
risks, and it is customary to provide a trust agreement for a specific purpose,
the trust agreement may provide that a beneficiary must undertake to use and
apply amounts drawn upon the trust fund, without diminution because of
insolvency of the beneficiary or the grantor, for the purpose of
(1) payment or reimbursement to the
beneficiary for the grantor's share under the reinsurance agreement to policy
owners reinsured under the reinsurance agreement on account of cancellations of
the policies;
(2) payment or
reimbursement of surrenders paid by the beneficiary but not yet recovered from
the grantor under the terms and provisions of the policies reinsured under the
reinsurance agreement;
(3) payment
or reimbursement of benefits or losses paid by the beneficiary but not yet
recovered from the grantor under the terms and provisions of the policies
reinsured under the reinsurance agreement;
(4) payment to the grantor of amounts held in
the trust fund in excess of the amount necessary to secure the credit or
reduction from liability for reinsurance taken by the beneficiary; or
(5) withdrawing an amount equal to the
unauthorized assuming insurer's share of liabilities to the extent that the
liabilities have not yet been paid by the unauthorized assuming insurer and
depositing that amount in a separate account in the name of the beneficiary in
a qualified United States financial institution in trust for a purpose listed
in (1) or (2) of this subsection, if the beneficiary has received notification
of termination of the trust fund and if the grantor's obligation under the
reinsurance agreement remains unliquidated and undischarged 10 days before the
termination date.
(d) A
reinsurance agreement between a ceding insurer and an unauthorized assuming
insurer may provide that
(1) the unauthorized
assuming insurer enter into a trust agreement, establishing a trust fund for
the benefit of the ceding insurer and specifying what the trust agreement is to
cover;
(2) the assets deposited in
a trust fund must be valued according to their current fair market value and
may only consist of cash in United States dollars, certificates of deposit
issued by a United States bank and payable in United States dollars,
investments permitted by
AS
21.21.020, or any combination of these; but
investments in or issued by an entity controlling, controlled by, or under
common control with either the grantor or the beneficiary of the trust may not
exceed five percent of the total investments;
(3) specific types of investments are to be
deposited in the trust fund;
(4)
before depositing an asset with the trustee, the grantor must execute an
assignment or endorsement in blank or transfer legal title to the trustee of
each share, obligation, or other asset requiring assignment, so the beneficiary
or the trustee, upon the direction of the beneficiary, may negotiate the asset
without further consent or signature of the grantor or any other
entity;
(5) all settlements of
accounts between the ceding insurer and the unauthorized assuming insurer must
be made in cash or cash equivalent;
(6) the grantor and the beneficiary agree
that the assets in the trust fund established by the provisions of the
reinsurance agreement may be withdrawn by the beneficiary at any time, and must
be used and applied by the beneficiary or its successors in interest by
operation of law, including any liquidator, rehabilitator, receiver, or
conservator, without diminution because of insolvency on the part of the
beneficiary or the grantor, only for
(A)
reimbursing the beneficiary for the grantor's share of premiums returned
because of cancellations to the owners of policies reinsured under the
reinsurance agreement;
(B)
reimbursing the beneficiary for the grantor's share of surrenders paid by the
beneficiary under the terms and provisions of the policies reinsured under the
reinsurance agreement;
(C)
reimbursing the beneficiary for the grantor's share of benefits or losses paid
by the beneficiary under the terms and provisions of the policies reinsured
under the reinsurance agreement;
(D) payment of any other amounts necessary to
secure the credit or reduction of liability for reinsurance taken by the ceding
insurer; or
(E) payment to the
grantor of amounts held in trust fund in excess of the amount necessary to
secure the credit or reduction of liability for credit taken by the ceding
insurer;
(7) the
unauthorized assuming insurer has the right to seek approval from the ceding
insurer, which the ceding insurer may not unreasonably withhold, to withdraw
any part or all of the trust assets and transfer those assets to the
unauthorized assuming insurer, if
(A) the
unauthorized assuming insurer, at the time of the withdrawal, replaces the
withdrawn assets with other qualified assets having a market value equal to the
market value of the assets withdrawn in order to maintain at all times the
deposit in the required amount; or
(B) after withdrawal and transfer, the market
value of the trust fund is not less than 102 percent of the required
amount;
(8) any amount
withdrawn in excess of the actual amounts required by (6) of this subsection is
returned to the trust fund, and that interest payments are made to the trust
fund at a rate not to exceed the prime rate of interest on the excess amounts
held under (6) of this subsection; or
(9) to the extent allowable by law, an award
by an arbitration panel or court of competent jurisdiction of any or all of the
following is permitted:
(A) interest at a
rate different from the prime rate of interest;
(B) court or arbitration costs;
(D) other reasonable expenses.
(e) If a trust
agreement is entered into in conjunction with a reinsurance agreement covering
risks other than life, annuity, or health, the ceding insurer and unauthorized
assuming insurer may include the provisions set out in (d)(1), (2), and (3) of
this section in the trust agreement instead of including them in the
reinsurance agreement.
(f) The
grantor may have the full and unqualified right to vote any shares of stock in
the trust fund and to promptly receive, in a manner determined by the grantor,
payment of interest or dividends upon any shares of stock or obligations
included in the trust. Upon receipt of any interest or dividends, the trustee
shall promptly either forward the interest or dividend payments to the grantor
or deposit them in a separate account established in the grantor's
name.
(g) The trustee may be given
authority to invest trust money or accept substitutions for any of the trust
assets if the trust agreement specifies categories of investments acceptable to
the beneficiary and authorizes the trustee to invest trust money and to accept
substitutions that the trustee determines are at least equal in market value to
the assets withdrawn and are consistent with the restrictions under
3
AAC 21.665(a) (12).
