Delaware Administrative Code
Title 18 - Insurance
1000 - Reinsurance
1004 - Term and Universal Life Insurance Reserve Financing
Section 1004-7.0 - Requirements applicable to covered policies to obtain credit for reinsurance; opportunity for remediation
Universal Citation: 18 DE Admin Code 1004-7.0
Current through Register Vol. 28, No. 3, September 1, 2024
7.1 Subject to the exemptions described in Section 4.0 of this regulation and the provisions of subsection 7.2 of this regulation, credit for reinsurance shall be allowed with respect to ceded liabilities pertaining to covered policies pursuant to 18 Del.C. §§ 911 or 912 if, and only if, in addition to all other requirements imposed by law or regulation, the following requirements are met on a treaty-by-treaty basis:
7.1.1 The ceding insurer's statutory policy
reserves with respect to the covered policies are established in full and in
accordance with the applicable requirements of 18 Del.C. §
1112 and related regulations and
actuarial guidelines, and credit claimed for any reinsurance treaty subject to
this regulation does not exceed the proportionate share of those reserves ceded
under the contract;
7.1.2 The
ceding insurer determines the required level of primary security with respect
to each reinsurance treaty subject to this regulation and provides support for
its calculation as determined to be acceptable to the Commissioner;
7.1.3 Funds consisting of primary security,
in an amount at least equal to the required level of primary security, are held
by or on behalf of the ceding insurer, as security under the reinsurance treaty
within the meaning of 18 Del.C. §
912, on a funds withheld, trust,
or modified coinsurance basis;
7.1.4 Funds consisting of other security, in
an amount at least equal to any portion of the statutory reserves as to which
primary security is not held pursuant to subsection 7.1.3 of this regulation,
are held by or on behalf of the ceding insurer as security under the
reinsurance treaty within the meaning of 18 Del.C. §
912;
7.1.5 Any trust used to satisfy the
requirements of this Section 7.0 shall comply with all of the conditions and
qualifications of 18 DE Admin. Code 1003, Section 12.0, except that:
7.1.5.1 Funds consisting of primary security
or other security held in trust, shall for the purposes identified in
subsection 6.2 of this regulation, be valued according to the valuation rules
set forth in subsection 6.2 of this regulation, as applicable;
7.1.5.2 There are no affiliate investment
limitations with respect to any security held in such trust if such security is
not needed to satisfy the requirements of subsection 7.1.3 of this
regulation;
7.1.5.3 The reinsurance
treaty must prohibit withdrawals or substitutions of trust assets that would
leave the fair market value of the primary security within the trust (when
aggregated with primary security outside the trust that is held by or on behalf
of the ceding insurer in the manner required by subsection 7.1.3 of this
regulation, 102% of the level required by subsection 7.1.3 of this regulation
at the time of the withdrawal or substitution; and
7.1.5.4 The determination of reserve credit
under 18 DE Admin. Code 1003, subsection 12.5 shall be determined according to
the valuation rules set forth in subsection 6.2 of this regulation, as
applicable; and
7.1.6 The
reinsurance treaty has been approved by the Commissioner.
7.2 Requirements at inception date and on an on-going basis; remediation.
7.2.1 The
requirements of subsection 7.1 of this regulation must be satisfied as of the
date that risks under covered policies are ceded if such date is on or after
the effective date of this regulation and on an ongoing basis thereafter. Under
no circumstances shall a ceding insurer take or consent to any action or series
of actions that would result in a deficiency under subsections 7.1.3 or 7.1.4
of this regulation with respect to any reinsurance treaty under which covered
policies have been ceded, and in the event that a ceding insurer becomes aware
at any time that such a deficiency exists, it shall use its best efforts to
arrange for the deficiency to be eliminated as expeditiously as
possible.
7.2.2 Prior to the due
date of each quarterly or annual statement, each life insurance company that
has ceded reinsurance within the scope of Section 3.0 of this regulation shall
perform an analysis, on a treaty-by-treaty basis, to determine, as to each
reinsurance treaty under which covered policies have been ceded, whether as of
the end of the immediately preceding calendar quarter (the valuation date) the
requirements of subsections 7.1.3 and 7.1.4 of this regulation were satisfied.
The ceding insurer shall establish a liability equal to the excess of the
credit for reinsurance taken over the amount of primary security actually held
pursuant to subsection 7.1.3 of this regulation, unless either:
7.2.2.1 The requirements of subsections 7.1.3
and 7.1.4 of this regulation were fully satisfied as of the valuation date as
to such reinsurance treaty; or
7.2.2.2 Any deficiency has been eliminated
before the due date of the quarterly or annual statement to which the valuation
date relates through the addition of primary security and/or other security, as
the case may be, in such amount and in such form as would have caused the
requirements of subsections 7.1.3 and 7.1.4 of this regulation to be fully
satisfied as of the valuation date.
7.3 Nothing in subsection 7.2.2 of this regulation shall be construed to allow a ceding company to maintain any deficiency under subsection 7.1.3 or 7.1.4 of this regulation for any period of time longer than is reasonably necessary to eliminate it.
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