Code of Maine Rules, Chapter 740, Section 031-740-6 - Certified reinsurers | Code of Maine Rules

A. In General. Pursuant to Title 24A M.R.S.A. §731 B(1)(B-2), the Superintendent shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that has been certified as a reinsurer in this State at all times for which statutory financial statement credit for reinsurance is claimed under this section.

B. Security. The credit allowed shall be based upon the security held by or on behalf of the ceding insurer in accordance with a rating assigned to the certified reinsurer by the Superintendent. The security shall be in a form consistent with the requirements of Title 24-A M.R.S.A. §§ 731-B(1) (B-2) and 731-B(3) and either Paragraph (2) of this subsection or Section 12, 16, or 17 of this rule.

(1) The amount of security must equal or exceed the following percentage of the reinsured obligations for which credit is claimed:

Rating	Security Required
Secure - 1	0%
Secure - 2	10 %
Secure - 3	20%
Secure - 4	50%
Secure - 5	75%
Vulnerable - 6	100%

(2) The security may be provided through a multi-beneficiary trust meeting the requirements of Section 11, with the following modifications:

(a) The qualifying assets held in the trust must equal or exceed the percentage specified in Paragraph (1) of the aggregate obligations secured by the trust, plus a surplus of at least $10,000,000.

(b) If the certified reinsurer also maintains a multi-beneficiary trust for obligations required to be fully secured under Section 11 or comparable requirements of other states, the certified reinsurer shall maintain separate trust accounts for its obligations secured under this section or comparable requirements of other United States jurisdictions and for its obligations that are required to be fully secured. The trust accounts may not be approved as qualifying security unless the reinsurer has bound itself, by the language of the trust and by agreement with the insurance regulator with principal oversight of each such trust account, to apply, upon termination of any such trust account, the remaining surplus of that trust to the extent necessary to fund any deficiency of any other such trust account.

(3) Affiliated reinsurance transactions shall receive the same opportunity for reduced security requirements as all other reinsurance transactions.

(4) The Superintendent shall require the certified reinsurer to post 100% security for the benefit of the ceding insurer or its estate upon the entry of an order of rehabilitation, liquidation, or conservation against the ceding insurer.

(5)I n order to facilitate the prompt payment of claims, the Superintendent may permit a certified reinsurer to defer posting security for catastrophe recoverables for a period of up to one year from the date of the first instance of a liability reserve entry by the ceding company as a result of a loss from a catastrophic occurrence as recognized by the Superintendent. The one-year deferral period is contingent upon the certified reinsurer continuing to pay claims in a timely manner, and applies only to reinsurance recoverables for the following lines of business as reported on the NAIC annual financial statement and related specifically to the catastrophic occurrence:

(a) Line 1: Fire

(b) Line 2: Allied Lines

(c) Line 3: Farmowners multiple peril

(d) Line 4: Homeowners multiple peril

(e) Line 5: Commercial multiple peril

(f) Line 9: Inland Marine

(g) Line 12: Earthquake

(h) Line 21: Auto physical damage

(6) Credit for reinsurance under this section shall apply only to reinsurance contracts entered into or renewed on or after the effective date of the certification of the assuming insurer. Any reinsurance contract entered into before the effective date of the certification of the assuming insurer that is subsequently amended by the parties after that date to permit reduced collateral, or a new reinsurance contract covering any risk for which collateral was provided previously, shall only be subject to this section with respect to losses incurred and reserves reported on or after the effective date of the amendment or new contract.

(7) Nothing in this subsection shall prohibit the parties to a reinsurance agreement from agreeing to provisions establishing security requirements that exceed the minimum security requirements established for certified reinsurers under this subsection.

C. Certification Procedure

(1) A reinsurer requesting to be certified by the Superintendent shall apply using the application form developed by the NAIC, or as otherwise specified by the Superintendent. The Superintendent shall post notice on the Bureau of Insurance Web site promptly upon receipt of any application for certification, with instructions on how members of the public may respond to the application. The Superintendent may not take final action on the application until at least 30 days after posting the notice required by this paragraph.

(2) Upon approval of a reinsurer's application for certification, the Superintendent shall assign a rating in accordance with this subsection and issue written notice to the reinsurer of its certification and rating. The Superintendent shall publish a list of all certified reinsurers and their ratings.

(3) In order to be eligible to receive and maintain certification, a reinsurer must meet the following requirements:

(a) The reinsurer must be domiciled and licensed to transact insurance or reinsurance in a jurisdiction that has been determined by the Superintendent to be a qualified jurisdiction pursuant to Subsection D.

(b) The reinsurer must maintain capital and surplus, or its equivalent, of no less than $250,000,000 calculated in accordance with Subparagraph (7)(d). This requirement may also be satisfied by an association including incorporated and individual unincorporated underwriters having minimum capital and surplus equivalents (net of liabilities) of at least $250,000,000 and a central fund containing a balance of at least $250,000,000.

(c) The reinsurer must maintain financial strength ratings from two or more rating agencies deemed acceptable by the Superintendent. These ratings must be based on interactive communication between the rating agency and the assuming insurer and may not be based solely on publicly available information. Acceptable rating agencies include the following:

(i) Standard & Poor's;

(ii) Moody's Investors Service;

(iii) Fitch Ratings;

(iv) A.M. Best Company; or

(v) Any other Nationally Recognized Statistical Rating Organization.

(d) The reinsurer must comply with any other requirements reasonably imposed by the Superintendent.

(4) Each certified reinsurer shall be rated on a legal entity basis, with due consideration being given to the group rating where appropriate, except that an association including incorporated and individual unincorporated underwriters that has been approved to do business as a single certified reinsurer may be evaluated on the basis of its group rating. Factors that may be considered as part of the evaluation process include, but are not limited to, the following:

(a) The certified reinsurer's financial strength ratings from acceptable rating agencies. Unless an exception is granted in accordance with Subsection I, the Superintendent may not assign a rating that exceeds the lowest regulatory rating corresponding in the table below to the financial strength rating that any of the listed rating agencies assigns the certified reinsurer. A failure to obtain or maintain at least two financial strength ratings from acceptable rating agencies shall result in loss of eligibility for certification;

Regulatory	A.M. Best	S & P	Moody's	Fitch
Secure - 1	A++	AAA	Aaa	AAA
Secure - 2	A+	AA+, AA, AA-	Aa1, Aa2, Aa3	AA+, AA, AA-
Secure - 3	A	A+, A	A1, A2	A+, A
Secure - 4	A-	A-	A3	A-
Secure - 5	B++, B+	BBB+, BBB, BBB-	Baa1, Baa2, Baa3	BBB+, BBB, BBB-
Vulnerable - 6	B or lower	BB+ or lower	Ba1 or lower	BB+ or lower

(b) The business practices of the certified reinsurer in dealing with its ceding insurers, including its record of compliance with reinsurance contractual terms and obligations;

(c) For a certified reinsurer domiciled in the United States, a review of the most recent applicable NAIC Annual Statement Blank, including in particular Schedule F for property/casualty reinsurers or Schedule S for life and health reinsurers;

(d) For a certified reinsurer not domiciled in the United States, an annual review of filings with its domiciliary regulator comparable to the NAIC annual statement, together with Form CR-F or Form CR-S as applicable, filed with the Superintendent pursuant to Subparagraph 7(b);

(e) The reputation of the certified reinsurer for prompt payment of claims under reinsurance agreements, based on an analysis of ceding insurers' Schedule F reporting of overdue reinsurance recoverables, including the proportion of obligations that are more than 90 days past due or are in dispute, with specific attention given to obligations payable to companies that are in administrative supervision or receivership;

(f) Regulatory actions against the certified reinsurer;

(g) The audited financial statements of the certified reinsurer, on both a legal entity and an enterprise basis, for at least the two most recent years, together with reports of the independent auditor and actuarial opinions;

(h) The liquidation priority of obligations to a ceding insurer in the certified reinsurer's domiciliary jurisdiction in the context of an insolvency proceeding;

(i) The certified reinsurer's participation in any solvent scheme of arrangement, or similar procedure, that involves United States ceding insurers;

(j) Any material uncertainty regarding the fitness or financial condition of the reinsurer resulting from the unavailability of information specified in this paragraph; and

(k) Any other information deemed relevant by the Superintendent.

(5) Based on the analysis conducted under Subparagraph (4)(e) of a certified reinsurer's reputation for prompt payment of claims, the Superintendent may make appropriate adjustments in the security the certified reinsurer is required to post to protect its liabilities to United States ceding insurers. The Superintendent shall reduce the certified reinsurer's rating by at least one level below the level indicated by the chart in Subparagraph (4)(a) if the Superintendent finds that either:

(a) More than 15% of the certified reinsurer's ceding insurance clients have undisputed reinsurance recoverables on paid losses in excess of $100,000 that are overdue by 90 days or more; or

(b) The aggregate amount of undisputed reinsurance recoverables on paid losses that are overdue by 90 days or more exceeds $50,000,000.

(6) Each certified reinsurer must agree to comply with the provisions of this rule and the applicable provisions of Title 24-A M.R.S.A. §731-B, and must submit a properly executed Form CR-1, attached as an appendix to this rule, as evidence of its submission to the jurisdiction of this State, appointment of the Superintendent as an agent for service of process in this State, and agreement to provide security for 100% of the assuming insurer's obligations attributable to reinsurance ceded by United States ceding insurers if the assuming insurer resists enforcement of a final United States judgment. The Superintendent shall not certify any assuming insurer that is domiciled in a jurisdiction that the Superintendent has determined does not adequately and promptly enforce final United States judgments or arbitration awards.

(7) Each certified reinsurer and each applicant for certification must, as a condition of certification, file the following information with the Superintendent:

(a) Notification within 10 days of any regulatory actions taken against the certified reinsurer, any change in the provisions of its domiciliary license, or any change in rating by an approved rating agency, including a statement describing such changes and the reasons therefor;

(b) Annually, Form CR-F for property/casualty reinsurers or Form CR-S for life/health reinsurers, attached as appendices to this rule;

(c) Annually, the report of the independent auditor on the financial statements of the insurance enterprise, on the basis described in Subparagraph (d);

(d) Annually, an audited financial statement, an actuarial opinion, and if applicable any additional financial statements or reports that the certified reinsurer is required to file with insurance or securities regulators in its domiciliary jurisdiction. With the initial application for certification, audited financial statements, actuarial opinions, and regulatory filings for the most recent two years. The filing shall include English translations of any documents written in another language.

(e) At least annually, an updated list of all disputed and overdue reinsurance claims regarding reinsurance assumed from ceding insurers domiciled in the United States;

(f) A certification from the certified reinsurer's domiciliary regulator that the certified reinsurer is in good standing and maintains capital in excess of the jurisdiction's highest regulatory action level;

(g) Prior notice to the Superintendent, if the certified reinsurer proposes participation in any solvent scheme of arrangement or similar procedure; and

(h) Any other information that the Superintendent may reasonably require.

(8) Change in Rating or Revocation of Certification:

(a) In the case of a downgrade by a rating agency or other disqualifying circumstance, the Superintendent shall upon written notice assign a new rating to the certified reinsurer in accordance with the requirements of Paragraph (4).

(b) The Superintendent has the authority to suspend, revoke, or otherwise modify a certified reinsurer's certification at any time if the certified reinsurer fails to meet its obligations or security requirements under this section, or if other financial or operating results of the certified reinsurer, or documented significant delays in payment by the certified reinsurer, lead the Superintendent to reconsider the certified reinsurer's ability or willingness to meet its contractual obligations. If a certified reinsurer's domiciliary jurisdiction ceases to be a qualified jurisdiction, then the Superintendent may suspend the reinsurer's certification indefinitely, in lieu of revocation.

(c) If the rating of a certified reinsurer is upgraded by the Superintendent, the certified reinsurer may meet the security requirements applicable to its new rating on a prospective basis, but the Superintendent shall require the certified reinsurer to post security under the previously applicable security requirements as to all contracts in force on or before the effective date of the upgraded rating. If the rating of a certified reinsurer is downgraded by the Superintendent, the Superintendent shall require the certified reinsurer to meet the security requirements applicable to its new rating for all business it has assumed as a certified reinsurer.

(d) Upon revocation of the certification of a certified reinsurer by the Superintendent, the assuming insurer shall be required to post security in accordance with Sections 11 through 17 in order for the ceding insurer to continue to take credit for reinsurance ceded to the assuming insurer. If funds continue to be held in trust in accordance with Paragraph B(2), the Superintendent may allow additional credit equal to the ceding insurer's pro rata share of such funds, discounted to reflect the risk of uncollectibility and anticipated expenses of trust administration. Notwithstanding the change of a certified reinsurer's rating or revocation of its certification, a domestic insurer that has ceded reinsurance to that certified reinsurer may not be denied credit for reinsurance for a period of three months for all reinsurance ceded to that certified reinsurer, unless the reinsurance is found by the Superintendent to be at high risk of uncollectibility.

D. Qualified Jurisdictions

(1) If, upon conducting an evaluation under this section with respect to the reinsurance supervisory system of any alien assuming insurer, the Superintendent in his or her discretion determines that the jurisdiction meets the requirements to be recognized as a qualified jurisdiction, the Superintendent shall publish notice and evidence of such recognition in an appropriate manner. The Superintendent may establish a procedure to withdraw recognition of those jurisdictions that are no longer qualified.

(2) In order to determine whether the domiciliary jurisdiction of an alien assuming insurer is eligible to be recognized as a qualified jurisdiction, the Superintendent shall evaluate the jurisdiction's reinsurance supervisory system, both initially and on an ongoing basis, and consider the rights, benefits, and the extent of reciprocal recognition afforded by the jurisdiction to reinsurers licensed and domiciled in the United States. The Superintendent shall determine the appropriate approach for evaluating the qualifications of such jurisdictions, and create and publish a list of jurisdictions whose reinsurers may be approved by the Superintendent as eligible for certification. A qualified jurisdiction must agree in writing to share information and cooperate with the Superintendent with respect to all certified reinsurers domiciled within that jurisdiction. Additional factors to be considered by the Superintendent in determining whether to recognize the assuming insurer's domicile as a qualified jurisdiction include but are not limited to the following:

(a) The framework under which the assuming insurer is regulated;

(b) The structure and authority of the domiciliary regulator with regard to solvency regulation requirements and financial surveillance;

(c) The substance of financial and operating standards for reinsurers domiciled in the jurisdiction;

(d) The form and substance of financial reports required to be filed or made publicly available by reinsurers in the domiciliary jurisdiction and the accounting principles used;

(e) The willingness of the jurisdiction's regulator to cooperate with United States regulators in general and the Superintendent in particular;

(f) The history of performance by assuming insurers in the jurisdiction;

(g) Any documented evidence of substantial problems with the enforcement of final United States judgments in the domiciliary jurisdiction. A jurisdiction may not be recognized as a qualified jurisdiction if the Superintendent has determined that it does not adequately and promptly enforce final United States judgments or arbitration awards;

(h) Any relevant international standards or guidance with respect to mutual recognition of reinsurance supervision adopted by the International Association of Insurance Supervisors or successor organization; and

(i) Any other matters deemed relevant by the Superintendent.

(3) If the NAIC has published a list of recommended qualified jurisdictions, the Superintendent shall defer to that list in determining whether or not a jurisdiction is a qualified jurisdiction, but may make exceptions subject to the procedures established in Subsection I.

(4) United States jurisdictions that meet the requirements for accreditation under the NAIC financial standards and accreditation program shall be recognized as qualified jurisdictions.

(5) If more than one licensing regime with substantially different standards is maintained or recognized by the same jurisdiction, the Superintendent may evaluate each such licensing regime separately for purposes of determining whether to recognize it as a qualified jurisdiction under this subsection.

E. Recognition of Certification Issued by an NAIC-Accredited Jurisdiction

(1) If an applicant for certification is domiciled in a qualified jurisdiction and has been certified as a reinsurer in an NAIC-accredited jurisdiction, referred to in this subsection as the "lead state," the Superintendent has the discretion to defer to the lead state's certification and to defer to the rating assigned by the lead state, if the assuming insurer submits a properly executed Form CR-1 and such additional information as the Superintendent requires. In determining whether to grant certification under this subsection, the Superintendent shall give due consideration to any procedures established by the NAIC for lead-state certification and to any recommendations the NAIC Reinsurance Financial Analysis Working Group, or its successor organization, has made regarding the certification or rating of the applicant.

(2) If a reinsurer has been certified pursuant to this subsection, any change in the certified reinsurer's status or rating in the lead state shall apply automatically in this State as of the date it takes effect in the lead state. The certified reinsurer shall notify the Superintendent of any change in its status or rating within 10 days after receiving notice of the change.

(3) The Superintendent may withdraw recognition of the lead state's rating at any time and assign a new rating in accordance with Paragraph C(8).

(4) The Superintendent may withdraw recognition of the lead state's certification at any time, with written notice to the certified reinsurer. Unless the Superintendent suspends or revokes the certified reinsurer's certification in accordance with Subparagraph C(8)(b) of this section, the certified reinsurer's certification shall remain in good standing in this State for a period of three months, which shall be extended if additional time is necessary to consider the assuming insurer's application for certification in this State.

F. Mandatory Funding Clause. In addition to the clauses required under Section 14, any reinsurance contracts entered into or renewed under this section shall include a proper funding clause, which requires the certified reinsurer to provide and maintain security in an amount sufficient to avoid the imposition of any financial statement penalty on the ceding insurer under this section for reinsurance ceded to the certified reinsurer.

G. Reporting by Superintendent. The Superintendent shall comply with all reporting and notification requirements that may be established by the NAIC with respect to certified reinsurers and qualified jurisdictions.

H. Confidentiality. The Superintendent shall safeguard the confidentiality of all information filed or disclosed by a certified reinsurer or applicant for certification that is not otherwise publicly available and that is protected from public disclosure by Maine law, including the provisions of Title 24-A M.R.S.A. §§216(5) and 731-B(1) (B-2)(1)(e) that protect information provided to the Superintendent that is confidential under the laws of the reinsurer's domiciliary jurisdiction.

I. Exceptions. The Superintendent may only grant exceptions from the requirements of this section as authorized by the applicable provisions of this section for good cause shown, after notice and an opportunity for an adjudicatory hearing. Any exception granted must be consistent with the purposes of this section and supported by detailed findings of fact.

Code of Maine Rules02 - DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION031 - BUREAU OF INSURANCEChapter 740 - CREDIT FOR REINSURANCESection 031-740-6 - Certified reinsurers

Code of Maine Rules
02 - DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
031 - BUREAU OF INSURANCE
Chapter 740 - CREDIT FOR REINSURANCE
Section 031-740-6 - Certified reinsurers