(a) The
Commissioner shall allow credit for reinsurance ceded by a domestic insurer to
an assuming insurer that is licensed to write reinsurance by, and has its head
office or is domiciled in, a reciprocal jurisdiction, and which assuming
insurer meets other requirements of this section.
(b) For the purposes of this section, a
"reciprocal jurisdiction" is a jurisdiction, as designated by the Commissioner
pursuant to subsection (d) of this section, that meets one of the following:
(1) For the purposes of this section, a
non-United States jurisdiction that is subject to an in-force covered agreement
with the United States, each within its legal authority, or, in the case of a
covered agreement between the United States and European Union, is a member
state of the European Union. For purposes of this subsection, a "covered
agreement" is an agreement entered into pursuant to the Dodd-Frank Wall Street
Reform and Consumer Protection Act,
31 USC
313 and
314, that is
currently in effect or in a period of provisional application and addresses the
elimination, under specified conditions, of collateral requirements as a
condition for entering into any reinsurance agreement with a ceding insurer
domiciled in this state or for allowing the ceding insurer to recognize credit
for reinsurance;
(2) A United
States jurisdiction that meets the requirements for accreditation under the
NAIC financial standards and accreditation program; or
(3) A qualified jurisdiction, as determined
by the Commissioner pursuant to section 38a-85a(c) of the Connecticut General
Statutes or section
38a-88-4
a(c) of the Regulations of Connecticut State Agencies, which is not otherwise
described in subdivision (1) or (2) of this subsection and which the
Commissioner determines meets all of the following additional requirements:
(A) Provides that an insurer which has its
head office or is domiciled in such qualified jurisdiction shall receive credit
for reinsurance ceded to a United States-domiciled assuming insurer in the same
manner as credit for reinsurance is received for reinsurance assumed by
insurers domiciled in such qualified jurisdiction;
(B) Does not require a United
States-domiciled assuming insurer to establish or maintain a local presence as
a condition for entering into a reinsurance agreement with any ceding insurer
subject to a regulation by the non-United States jurisdiction or as a condition
to allow the ceding insurer to recognize credit for such reinsurance;
(C) Recognizes the United States state
regulatory approach to group supervision and group capital, by providing
written confirmation by a competent regulatory authority, in such qualified
jurisdiction, that insurers and insurance groups that are domiciled or maintain
their headquarters in this state or another jurisdiction accredited by the NAIC
shall be subject only to worldwide prudential insurance group supervision
including worldwide group governance, solvency and capital, and reporting, as
applicable, by the Commissioner or the commissioner of the domiciliary state
and will not be subject to group supervision at the level of the worldwide
parent undertaking of the insurance or reinsurance group of the qualified
jurisdiction; and
(D) Provides
written confirmation by a competent regulatory authority in such qualified
jurisdiction that information regarding insurers and their parent, subsidiary,
or affiliated entities, if applicable, shall be provided to the Commissioner in
accordance with a memorandum of understanding or similar document between the
Commissioner and such qualified jurisdiction, including but not limited to the
International Association of Insurance Supervisors Multilateral Memorandum of
Understanding or other multilateral memoranda of understanding coordinated by
the NAIC.
(c)
Credit shall be allowed when the reinsurance is ceded from an insurer domiciled
in this state to an assuming insurer meeting each of the following conditions:
(1) The assuming insurer is licensed to
transact reinsurance by, and has its head office or is domiciled in, a
reciprocal jurisdiction.
(2) The
assuming insurer has and maintains on an ongoing basis minimum capital and
surplus, or its equivalent, calculated on at least an annual basis as of the
preceding December 31 or at the annual date otherwise statutorily reported to
the reciprocal jurisdiction, and confirmed as set forth in subdivision (7) of
this subsection according to the methodology of its domiciliary jurisdiction,
in the following amounts:
(A) No less than
$250,000,000; or
(B) If the
assuming insurer is an association, including incorporated and individual
unincorporated underwriters:
(i) Minimum
capital and surplus equivalents (net of liabilities) or own funds of the
equivalent of at least $250,000,000; and
(ii) A central fund containing a balance of
the equivalent of at least $250,000,000.
(3) The assuming insurer has and maintains on
an ongoing basis a minimum solvency or capital ratio, as applicable, as
follows:
(A) If the assuming insurer has its
head office or is domiciled in a reciprocal jurisdiction as defined in
subdivision (1) of subsection (b) of this section, the ratio specified in the
applicable covered agreement;
(B)
If the assuming insurer is domiciled in a reciprocal jurisdiction as defined in
subdivision (2) of subsection (b) of this section, a risk-based capital (RBC)
ratio of three hundred percent (300%) of the authorized control level,
calculated in accordance with the formula developed by the NAIC; or
(C) If the assuming insurer is domiciled in a
reciprocal jurisdiction as defined in subdivision (3) of subsection (b) of this
section, after consultation with the reciprocal jurisdiction and considering
any recommendations published through the NAIC committee process, such solvency
or capital ratio as the commissioner determines to be an effective measure of
solvency.
(4) The
assuming insurer agrees to and provides adequate assurance, in the form of a
properly executed Form RJ-1 (Appendix C of sections
38a-88-1
to
38a-88-12,
inclusive, of the Regulations of Connecticut State Agencies), of its agreement
to the following:
(A) The assuming insurer
shall provide prompt written notice and explanation to the Commissioner if it
falls below the minimum requirements set forth in subdivision (2) or (3) of
this subsection, or if any regulatory action is taken against it for serious
noncompliance with applicable law.
(B) The assuming insurer shall consent in
writing to the jurisdiction of the courts of this state and to the appointment
of the Commissioner as agent for service of process.
(i) The Commissioner may also require that
the consent required by this subparagraph be provided and included in each
reinsurance agreement under the Commissioner's jurisdiction.
(ii) Nothing in this subparagraph shall limit
or in any way alter the capacity of parties to a reinsurance agreement to agree
to alternative dispute resolution mechanisms, except to the extent such
agreements are unenforceable under applicable insolvency or delinquency
laws.
(C) The assuming
insurer shall consent in writing to pay all final judgments, wherever
enforcement is sought, obtained by a ceding insurer, that have been declared
enforceable in the territory where the judgment was obtained.
(D) Each reinsurance agreement shall include
a provision requiring the assuming insurer to provide security in an amount
equal to one hundred percent (100%) of the assuming insurer's liabilities
attributable to reinsurance ceded pursuant to that agreement if the assuming
insurer resists enforcement of a final judgment that is enforceable under the
law of the jurisdiction in which it was obtained or a properly enforceable
arbitration award, whether obtained by the ceding insurer or by its legal
successor on behalf of its estate, if applicable.
(E) The assuming insurer shall confirm that
it is not presently participating in any solvent scheme of arrangement, which
involves this state's ceding insurers, and shall agree to notify the ceding
insurer and the Commissioner and to provide one hundred percent (100%) security
to the ceding insurer consistent with the terms of the scheme should the
assuming insurer enter into such a solvent scheme of arrangement. Such security
shall be in a form consistent with the provisions of sections 38a-85, 38a-85a,
and 38a-86 of the Connecticut General Statutes and this section and sections
38a-88-4
and
38a-88-4
a of the Regulations of Connecticut State Agencies. For purposes of this
section, "solvent scheme of arrangement" means a foreign or alien statutory or
regulatory compromise procedure subject to requisite majority creditor approval
and judicial sanction in the assuming insurer's home jurisdiction either to
finally commute liabilities of duly noticed classed members or creditors of a
solvent debtor, or to reorganize or restructure the debts and obligations of a
solvent debtor on a final basis, and which may be subject to judicial
recognition and enforcement of the arrangement by a governing authority outside
the ceding insurer's home jurisdiction.
(F) The assuming insurer shall agree in
writing to meet the applicable information filing requirements as set forth in
subdivision (5) of this subsection.
(5) The assuming insurer or its legal
successor shall provide, if requested by the Commissioner, on behalf of itself
and any legal predecessors, the following documentation to the Commissioner:
(A) For the two years preceding entry into
the reinsurance agreement and on an annual basis thereafter, the assuming
insurer's annual audited financial statements, in accordance with the
applicable law of the jurisdiction of its head office or domiciliary
jurisdiction, as applicable, including the external audit report;
(B) For the two years preceding entry into
the reinsurance agreement, the solvency and financial condition report or
actuarial opinion, if filed with the assuming insurer's supervisor;
(C) Prior to entry into the reinsurance
agreement and not more than semi-annually thereafter, an updated list of all
disputed and overdue reinsurance claims outstanding for 90 days or more,
regarding reinsurance assumed from ceding insurers domiciled in the United
States; and
(D) Prior to entry into
the reinsurance agreement and not more than semi-annually thereafter,
information regarding the assuming insurer's assumed reinsurance by ceding
insurer, ceded reinsurance by the assuming insurer, and reinsurance recoverable
on paid and unpaid losses by the assuming insurer to allow for the evaluation
of the criteria set forth in subdivision (6) of this subsection.
(6) The assuming insurer shall
maintain a practice of prompt payment of claims under reinsurance agreements.
The lack of prompt payment shall be evidenced if any of the following criteria
is met:
(A) More than fifteen percent (15%)
of the reinsurance recoverables from the assuming insurer are overdue and in
dispute as reported to the Commissioner;
(B) More than fifteen percent (15%) of the
assuming insurer's ceding insurers or reinsurers have overdue reinsurance
recoverable on paid losses of 90 days or more which are not in dispute and
which exceed for each ceding insurer $100,000, or as otherwise specified in a
covered agreement; or
(C) The
aggregate amount of reinsurance recoverable on paid losses which are not in
dispute, but are overdue by 90 days or more, exceeds $50,000,000, or as
otherwise specified in a covered agreement.
(7) The assuming insurer's supervisory
authority shall confirm to the Commissioner on an annual basis that the
assuming insurer is in compliance with the requirements set forth in
subdivisions (2) and (3) of this subsection.
(8) Nothing in this subsection precludes an
assuming insurer from providing the Commissioner with information on a
voluntary basis.
(d) The
Commissioner shall timely create and publish a list of reciprocal
jurisdictions.
(1) A list of reciprocal
jurisdictions is published through the NAIC committee process. The
Commissioner's list shall include any reciprocal jurisdiction as defined in
subdivision (1) or (2) of subsection (b) of this section and the Commissioner
shall consider any other reciprocal jurisdiction included on the NAIC list. The
Commissioner may approve a jurisdiction that does not appear on the NAIC list
of reciprocal jurisdictions as provided by applicable law, regulation, or in
accordance with criteria published through the NAIC committee
process.
(2) The Commissioner may
remove a jurisdiction from the list of reciprocal jurisdictions upon a
determination that the jurisdiction no longer meets one or more of the
requirements of a reciprocal jurisdiction, as provided by applicable law,
regulation, or in accordance with a process published through the NAIC
committee process, except that the Commissioner shall not remove from the list
a reciprocal jurisdiction as defined in subdivision (1) or (2) of subsection
(b) of this section. Upon removal of a reciprocal jurisdiction from this list,
credit for reinsurance ceded to an assuming insurer domiciled in that
jurisdiction shall be allowed, if otherwise allowed pursuant to sections 38a-85
to 38a-87, inclusive, of the Connecticut General Statutes or sections
38a-88-1
to
38a-88-12,
inclusive, of the Regulations of Connecticut State Agencies.
(e) The Commissioner shall timely
create and publish a list of assuming insurers that have satisfied the
conditions set forth in this section and to which cessions shall be granted
credit in accordance with this section.
(1) If
an NAIC accredited jurisdiction has determined that the conditions set forth in
subsection (c) of this section have been met, the Commissioner has the
discretion to defer to that jurisdiction's determination, and add such assuming
insurer to the list of assuming insurers to which cessions shall be granted
credit in accordance with this subsection. The Commissioner may accept
financial documentation filed with another NAIC accredited jurisdiction or with
the NAIC in satisfaction of the requirements of subsection (c) of this
section.
(2) When requesting that
the Commissioner defer to another NAIC accredited jurisdiction's determination,
an assuming insurer must submit a properly executed Form RJ-1 (Appendix C of
sections
38a-88-1
to
38a-88-12,
inclusive, of the Regulations of Connecticut State Agencies), and additional
information as the Commissioner may require. A state that has received such a
request will notify other states through the NAIC committee process and provide
relevant information with respect to the determination of
eligibility.
(f) If the
Commissioner determines that an assuming insurer no longer meets one or more of
the requirements under this section, the Commissioner may revoke or suspend the
eligibility of the assuming insurer for recognition under this section.
(1) While an assuming insurer's eligibility
is suspended, no reinsurance agreement issued, amended or renewed after the
effective date of the suspension qualifies for credit except to the extent that
the assuming insurer's obligations under the contract are secured in accordance
with section
38a-88-6
of the Regulations of Connecticut State Agencies.
(2) If an assuming insurer's eligibility is
revoked, no credit for reinsurance may be granted after the effective date of
the revocation with respect to any reinsurance agreements entered into by the
assuming insurer, including reinsurance agreements entered into prior to the
date of revocation, except to the extent that the assuming insurer's
obligations under the contract are secured in a form acceptable to the
Commissioner and consistent with the provisions of section
38a-88-6
of the Regulations of Connecticut State Agencies.
(g) Before denying statement credit or
imposing a requirement to post security with respect to subsection (f) of this
section or adopting any similar requirement that will have substantially the
same regulatory impact as security, the Commissioner shall:
(1) Communicate to the ceding insurer, the
assuming insurer, and the assuming insurer's supervisory authority that the
assuming insurer no longer satisfies one of the conditions listed in subsection
(c) of this section;
(2) Provide
the assuming insurer with 30 days from the initial communication to submit a
plan to remedy the defect, and 90 days from the initial communication to remedy
the defect, except in exceptional circumstances in which a shorter period is
necessary for policyholder and other consumer protection;
(3) After the expiration of 90 days or less,
as set out in subdivision (2) of this subsection if the Commissioner determines
that no or insufficient action was taken by the assuming insurer, the
Commissioner may impose any of the requirements as set out in this subsection;
and
(4) Provide a written
explanation to the assuming insurer of any of the requirements set out in this
subsection.
(h) If
subject to a legal process of rehabilitation, liquidation or conservation, as
applicable, the ceding insurer, or its representative, may seek and, if
determined appropriate by the court in which the proceedings are pending, may
obtain an order requiring that the assuming insurer post security for all
outstanding liabilities.