Code of Maine Rules
02 - DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
031 - BUREAU OF INSURANCE
Chapter 740 - CREDIT FOR REINSURANCE
Section 031-740-13 - Permitted conditions of trust agreements

Universal Citation: 02 ME Code Rules ยง 031-740-13

Current through 2024-38, September 18, 2024

When a trust agreement is established in conjunction with a reinsurance agreement, the trust agreement may contain the following provisions:

A. Notwithstanding other provisions of this rule, where it is customary to provide a trust agreement for a specific purpose, a provision that the ceding insurer, if it is not itself the subject of a delinquency proceeding, may undertake to use and apply amounts drawn upon the trust account, without diminution because of the insolvency of the ceding insurer or the assuming insurer, only for the following purposes:

(1) To pay or reimburse the ceding insurer for the assuming insurer's share under the reinsurance agreement of:
(a) For life, annuity, and health risks, surrenders and benefits or losses paid by the ceding insurer under the terms and provisions of the policies reinsured under the reinsurance agreement, but not yet recovered from the assuming insurer, and premiums returned to policyowners on account of cancellations of policies reinsured under the reinsurance agreement, but not yet recovered from the assuming insurer; and

(b) For other risks, any losses and allocated loss expenses, or unallocated loss expenses if contained within the agreement, paid by the ceding insurer but not recovered from the assuming insurer, or unearned premiums due to the ceding insurer if not otherwise paid by the assuming insurer;

(2) To make payment to the assuming insurer of any amounts held in the trust account in excess of:
(a) For life, annuity, and health risks, assets with a current fair market value that is at least the actual amount required to fund the assuming insurer's obligations under the reinsurance agreement.

(b) For other risks, assets with a current fair market value that is at least 102 percent of the actual amount required to fund the assuming insurer's obligations under the reinsurance agreement; or

(3) Where the ceding insurer has received notification of termination of the trust account and where the assuming insurer's obligations under the particular reinsurance agreement remain unliquidated and undischarged in whole or part ten (10) days prior to the termination date and have not been fully secured by replacement security approved by the Superintendent, to withdraw amounts equal to the unsecured obligations and deposit those amounts in the name of the ceding insurer in any qualified United States financial institution (as defined in Title 24-A M.R.S.A. §731-B(4-A)) . Such withdrawn assets shall be maintained in a separate account apart from general assets, in trust for such uses and purposes specified in Paragraphs (1) and (2) above as may remain executory after such withdrawal and for any period after the termination date.

B. That the trustee may resign upon delivery of a written notice of resignation, effective not less than ninety (90) days after receipt by the beneficiary and grantor of the notice, and that the trustee may be removed by the grantor by delivery to the trustee and the beneficiary of a written notice of removal, effective not less than ninety (90) days after receipt by the trustee and the beneficiary of the notice, provided that no such resignation or removal shall be effective until a successor trustee has been duly appointed and approved by the beneficiary and the grantor, and all assets in the trust have been duly transferred to the new trustee.

C. That the grantor may have the full and unqualified right to vote any shares of stock in the trust account and may have a right to receive from time to time payments of any dividends or interest upon any shares of stock or obligations included in the trust account. Any such interest or dividends shall be either forwarded promptly upon receipt to the grantor or deposited in a separate account established in the grantor's name.

D. That the trustee may be given authority to invest, and accept substitutions of, any funds in the account, provided that no substitution shall be made without prior approval of the beneficiary, unless the trust agreement specifies categories of investments acceptable to the beneficiary and authorizes the trustee to invest funds and to accept substitutions which the trustee determines are at least equal in current fair market value to the assets withdrawn and which are permissible under Subsection 12(L) of this rule and any additional investment limitations established by the agreement.

E. That upon termination of the trust account, all assets not previously withdrawn by the beneficiary may, with written approval by the beneficiary, be delivered to the grantor provided adequate security for the reinsurance obligations is otherwise maintained under exclusive control of the beneficiary.

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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