A. Pursuant to Title
24-A M.R.S.A.
§731-B(1)(C), the
Superintendent shall allow credit for reinsurance ceded by a domestic insurer
to an assuming insurer that has, at all times for which statutory financial
statement credit for reinsurance is claimed under this section, maintained a
trust fund in compliance with this section and other applicable provisions of
this rule in a qualified United States financial institution (as defined in
Title
24-A M.R.S.A.
§731-B(4-A) ), for the
payment of the valid claims of its United States ceding insurers, their assigns
and successors in interest. The assuming insurer shall report annually to the
Superintendent substantially the same information as that required to be
reported on the NAIC annual statement form by licensed insurers, to enable the
Superintendent to determine the sufficiency of the trust fund. In addition to
other requirements, multi-beneficiary trust funds shall be maintained as
follows:
(1) The trust for a single assuming
insurer must consist of a trusteed account in an amount not less than the
assuming insurer's obligations attributable to reinsurance ceded by United
States insurers, excluding obligations that are otherwise secured by acceptable
means, and, in addition, a surplus of at least $20,000,000, except as otherwise
provided in this paragraph. 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 regulator with principal 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%
of the assuming insurer's obligations attributable to reinsurance ceded by
United States ceding insurers covered by the trust.
(2) The trust fund for a group including
incorporated and individual unincorporated underwriters shall be subject to the
following requirements:
(a) The trust may
consist in part of accounts restricted to the liabilities of particular
underwriters, syndicates, or years of account, but no surplus in any such
account may be offset against a deficit in another account in determining the
overall sufficiency of the trust. The funds held in trust must collectively
include the following:
(i) Funds in trust in
an amount not less than the respective underwriters' several obligations,
excluding obligations that are otherwise secured by acceptable means,
attributable to business ceded by United States-domiciled ceding insurers to
any member of the group under reinsurance agreements with an inception,
amendment, or renewal date on or after January 1, 1993;
(ii) Funds in trust in an amount not less
than the respective underwriters' several insurance and reinsurance
obligations, excluding obligations that are otherwise secured by acceptable
means, attributable to business written in the United States under reinsurance
agreements with an inception date on or before December 31, 1992, and not
amended or renewed after that date, and under any insurance contracts secured
by the same trust accounts; and
(iii) In addition, a trusteed surplus of at
least $100,000,000 which must be held jointly for the benefit of United States
ceding insurers of any member of the group for any year of account.
(b) The incorporated members of
the group shall not be engaged in any business other than underwriting as a
member of the group and must 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, within 90 days after its financial statements are due
to be filed with the group's domiciliary regulator, make available to the
Superintendent:
(i) An annual certification by
the group's domiciliary regulator of the solvency of each underwriter member of
the group; or
(ii) If a
certification is unavailable, a financial statement, prepared by independent
public accountants, of each underwriter member of the group.
B. A
reinsurer maintaining trust funds pursuant to this section must establish a
trust in a form approved by the Superintendent which complies with Title
24-A M.R.S.A.
§731-B(1)(C)(5) and
this rule. The form of the trust and any trust amendments shall also be filed
with the Superintendent and with the other domiciliary regulators of ceding
insurers. 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
United States;
(2) Legal title to
the assets of the trust shall be vested in the trustee for the benefit of all
of the grantor's United States ceding insurers, their assigns and successors in
interest. They shall be the sole beneficiaries of the trust, except for trusts
that were established before January 1, 1993, for the benefit of both cedents
and direct policyholders that are and fully funded in compliance with
Subparagraph A(2)(a) of this section;
(3) The trust shall be subject to examination
as determined by the Superintendent or by other domiciliary regulators of any
United States ceding insurer;
(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 Superintendent 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 before the end of the
current year;
(6) 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 Subsection A, 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:
(a)
The trustee shall comply with an order of the insurance regulator with
oversight over the trust or with an order of a court of competent jurisdiction
directing the trustee to transfer all of the assets of the trust fund to the
insurance regulator with oversight over the trust, or other designated
receiver.
(b) The assets shall be
distributed by and claims shall be filed with and valued by the insurance
regulator with oversight over the trust in accordance with the laws of the
state in which the trust is domiciled that govern the liquidation of insurance
companies domiciled in that state.
(c) If the insurance regulator with 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 insurance regulator with oversight over the trust shall return
the assets, or any part thereof, to the trustee for distribution in accordance
with the trust agreement.
(d) The
grantor shall waive any right otherwise available to it under United States law
that is inconsistent with this paragraph.
(e) If a trust fund has been determined to
lack the surplus required by this subsection, the Superintendent shall have the
discretion to grant credit for reinsurance recoveries for liabilities ceded
before the ceding insurer had notice of the impairment of the trust, but the
credit shall not exceed an amount determined by the Superintendent to be fully
secured by the trust notwithstanding the impairment.
C. In determining the adequacy of
the trust's funding, the Superintendent shall consider only the assets that
have been permitted and valued by the insurance regulator with principal
oversight over the trust under standards that the Superintendent has determined
to be consistent with the purposes of this rule.
D. Notwithstanding any other provision of
this section, it shall be a condition precedent for presentation of a claim by
a ceding insurer to a trust established pursuant to this section that any
specific security provided to the ceding insurer for the same reinsurance
obligation in accordance with Sections
12,
16, or
17 of this rule has been applied,
until exhausted, to the payment of the liabilities of the assuming insurer to
the ceding insurer.
