Current through Register Vol. 48, No. 12, March 22, 2024
a) Pursuant to
Section 173.1(1)(C) of the Code, the Director shall allow credit for
reinsurance ceded by a domestic insurer to an assuming insurer that, as of the
date of the ceding insurer's most recent statutory financial statement,
maintains a trust fund in an amount prescribed in subsection (b) in a qualified
U.S. financial institution as defined in Section 173.1(3)(B) of the Code, for
the payment of the valid claims of its U.S. policyholders and ceding insurers,
their assigns and successors in interest. The assuming insurer shall report
annually to the Director substantially the same information as that required to
be reported on the NAIC annual statement form by licensed insurers, to enable
the Director to determine the sufficiency of the trust fund.
b) The following requirements apply to the
following categories of assuming insurer:
1)
The trust fund for a single assuming insurer shall consist of funds in trust in
an amount not less than the assuming insurer's gross liabilities attributable
to business written in the U.S., and in addition, a trusteed surplus of not
less than $20 million, except as provided in Section 173.1(1)(C)(3)(a-5) of the
Code. The assuming insurer shall file a properly executed Form AR-1 Certificate
of Assuming Insurer found in Appendix A as evidence of the submission to this
State's authority to examine its books and records and shall certify that it
will bear the expense of any such examination.
2) Certain Group Trust Fund Requirements
A) The trust fund for a group including
incorporated and unincorporated individual underwriters shall consist of:
i) 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 U.S. domiciled ceding
insurers to any underwriter of the group; and
ii) 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 Part, funds in trust in an amount not less than the respective
underwriters' several insurance and reinsurance liabilities attributable to
business written in the U.S.
B) In addition, the group shall maintain a
trusteed surplus of which $100 million shall be held jointly for the benefit of
the U.S. ceding insurers of any member of the group for all the years of
account. The group shall file a properly executed Form AR-1 Certificate of
Assuming Insurer found in Appendix A 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. The group shall make available to the Director annual
certifications by the group's domiciliary regulator and its independent public
accountants of the solvency of each underwriter member of the group.
C) The incorporated members of the group
shall 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.
3) Insurers
Conducting Business Outside the United States
A) The trust fund for a group of incorporated
insurers under common administration, whose members possess aggregate
policyholders surplus of $10 billion (calculated and reported in substantially
the same manner as prescribed by the annual statement instructions and NAIC
Accounting Practices and Procedures Manual) and that has continuously
transacted an insurance business outside the U.S. for at least 3 years
immediately prior to making application for accreditation:
i) shall consist of funds in trust in an
amount not less than the assuming insurers' gross liabilities attributable to
business ceded by U.S. ceding insurers to any members of the group pursuant to
reinsurance contracts issued in the name of the group; and,
ii) shall maintain a joint trusteed surplus
of which $100 million shall be held jointly for the benefit of U.S. ceding
insurers of any member of the group.
B) The group shall file a properly executed
Form AR-1 Certificate of Assuming Insurer found in Appendix A 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.
C)
The group shall make available to the Director annual certifications by the
members' domiciliary regulators and their independent public accountants of the
solvency of each member of the group.
c) The trust shall be established in a form
approved by the Director and complying with Section 173.1(1) of the Code and
this Part. The trust instrument shall 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
U.S.
2) Legal title to the assets
of the trust shall be vested in the trustee for the benefit of the grantor's
U.S. policyholders and 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.
5) No later
than February 28 of each year the trustees 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 shall not
expire prior to the next following December 31.
6) No amendment to the trust shall be
effective unless reviewed and approved in advance by the Director.