Code of Maine Rules
02 - DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
031 - BUREAU OF INSURANCE
Chapter 740 - CREDIT FOR REINSURANCE
Section 031-740-12 - Required conditions of single-beneficiary trust agreements

Universal Citation: 02 ME Code Rules ยง 031-740-12

Current through 2024-38, September 18, 2024

Pursuant to Title 24-A M.R.S.A. §731-B(1)(D), the Superintendent shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer, under reinsurance contracts that comply with Sections 14 and 15, if at all times for which statutory financial statement credit is claimed under this section, a trust fund is maintained for the sole benefit of the ceding insurer, including any successor by operation of law, in compliance with this section and other applicable provisions of this rule. The credit allowed shall be limited to the lesser of the current fair market value of the trust assets or the amount of the reinsurance obligations secured by the trust.

A. No amendment to the trust shall be effective unless reviewed and approved in advance by the Superintendent.

B. The trust agreement shall be entered into between the beneficiary, the grantor, and a trustee which shall be a qualified United States financial institution as defined in Title 24-A M.R.S.A. §731-B(4-A).

C. All assets in the trust account credited thereunder shall be held by the trustee in the United States.

D. The trust agreement must provide that:

(1) The beneficiary shall have the right to withdraw assets from the trust account at any time, without notice to the grantor, subject only to written notice from the beneficiary to the trustee;

(2) No other statement or document is required to be presented in order to withdraw assets, except that the beneficiary may be required to acknowledge receipt of withdrawn assets;

(3) No other conditions or qualifications not contained in the trust agreement shall apply; and

(4) The agreement constitutes the entire agreement of the parties and no other documents will be referred to or apply, except as expressly provided in the agreement. Any such express exceptions must be consistent with Section 13 of this rule.

E. The trust agreement must require that the trustee:

(1) Receive and hold all assets transferred to the trustee in a safe place;

(2) Determine that all assets are in such form that the beneficiary, or the trustee upon direction by the beneficiary, may whenever necessary negotiate any such assets without consent or signature from the grantor or any other person or entity;

(3) Furnish a statement of trust assets to the grantor and the beneficiary at establishment and at intervals no less frequent than the end of each calendar quarter valued in accordance with current market value;

(4) Notify the grantor and the beneficiary within ten (10) days of any deposits to or withdrawals from the trust account;

(5) Upon written demand of the beneficiary, immediately take any and all steps necessary to transfer all right, title, and interest in the assets held in the trust account to the beneficiary and deliver physical custody of the assets to the beneficiary; and

(6) Permit no withdrawals except on written instructions from the beneficiary, and permit no substitutions of assets without written instructions from the beneficiary except as authorized pursuant to powers granted in compliance with Subsection 13(D), or, with notice to the beneficiary, upon call or maturity of a trust asset.

F. The trust agreement shall be made subject to and governed by the laws of the state in which the trust is established.

G. The trust agreement shall prohibit invasion of the trust corpus for the purpose of paying compensation to, or reimbursing the expenses of, the trustee.

H. The trust agreement shall provide that the trustee shall be liable for its negligence, willful misconduct, or lack of good faith.

I. In order for a letter of credit to qualify as an asset of the trust, it must comply with Section 16, and the trust agreement or some other binding agreement approved by the Superintendent must give the trustee the right and the obligation to draw down the full amount of the letter of credit immediately and hold the proceeds in trust for the beneficiaries of the trust if the letter of credit will otherwise expire without being renewed or replaced, or if the Superintendent will no longer recognize it as a qualifying trust asset. The trust agreement must further provide that the trustee's failure to draw against the letter of credit in circumstances where a draw is required shall be deemed to be actionable negligence or willful misconduct.

J. The trust agreement shall provide that written notification of termination must be delivered by the trustee to the beneficiary between 30 and 45 days before termination of the trust account.

K. The failure of any trust agreement to specifically identify a beneficiary shall not be construed to affect any actions or rights that the Superintendent or a statutory successor may take or possess pursuant to the provisions of the laws of this State.

L. Either the trust agreement or the reinsurance agreement must provide that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash in United States dollars, certificates of deposit issued by a United States bank and payable in United States dollars, letters of credit complying with Subsection I, and investments permitted by the Maine Insurance Code, or any combination of the above, provided that investments in or issued by an entity controlling, controlled by, or under common control with either the grantor or the beneficiary of the trust shall not exceed 5% of total investments. The agreement may further specify the types of investments to be deposited. If the reinsurance agreement covers life, annuities or accident and health risks, then the provisions required by this paragraph must be included in the reinsurance agreement.

Disclaimer: These regulations may not be the most recent version. Maine may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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