Code of Maryland Regulations
Title 31 - MARYLAND INSURANCE ADMINISTRATION
Subtitle 05 - ASSETS, LIABILITIES, RESERVES, AND INVESTMENTS OF INSURERS
Chapter 31.05.07 - Life and Health Reinsurance Agreements
Section 31.05.07.05 - Circumstances Under Which Reduction of Liability and Establishment of Asset Prohibited

(1) Renewal expense allowances provided or to be provided to the ceding insurer by the reinsurer in any accounting period are not sufficient to cover anticipated allocable renewal expenses of the ceding insurer on the portion of the business reinsured, unless a liability is established for the present value of the shortfall using assumptions equal to the applicable statutory reserve basis on the business reinsured;

(2) The ceding insurer can be deprived of surplus or assets:

(3) The ceding insurer is required to reimburse the reinsurer for negative experience;

(4) The ceding insurer is required, at specific points in time scheduled in the agreement, to terminate or automatically recapture all or part of the reinsurance ceded;

(5) The reinsurance agreement involves the possible payment by the ceding insurer to the reinsurer of amounts other than from income realized from the reinsured policies, such as reinsurance premiums or other fees or charges to a reinsurer that are greater than the direct premiums collected by the ceding company;

(6) All of the significant risk inherent in the business being reinsured is not transferred;

(7) The credit quality risk, reinvestment risk, or disintermediation risk is significant for the business reinsured and except as provided in Regulation .06B of this chapter, the ceding company does not:

(8) Settlements are made less frequently than quarterly or payments due from the reinsurer are not made in cash within 90 days after the settlement date;

(9) The ceding insurer is required to make representations or warranties:

(10) The reinsurance agreement is entered into for the principal purpose of producing significant surplus aid for the ceding insurer, typically on a temporary basis, while not transferring all of the significant risks inherent in the business reinsured and, in substance or effect, the expected potential liability to the ceding insurer remains basically unchanged.

(1) Section A(2) of this regulation does not prohibit a reinsurer from terminating the reinsurance agreement for nonpayment of:

(2) Section A(3) of this regulation does not prohibit:

(3) Voluntary termination under §B(2)(b) of this regulation does not include termination because of unreasonable provisions that allow the reinsurer to reduce its risk under the agreement, such as a provision that gives the reinsurer the right to increase reinsurance premiums or risk and expense charges to excessive levels forcing the ceding company to prematurely terminate the reinsurance agreement.