New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter IV - Financial Condition Of Insurer and Reports to Superintendent
Subchapter C - Fire, Marine, Casualty And Surety Insurers
Part 112 - Loss Portfolio Transfers
Section 112.5 - Requirements
Current through Register Vol. 46, No. 12, March 20, 2024
Except that there must be compliance with the requirements of subdivisions (a) and (j) of this section, in every agreement irrespective of when executed or entered into, no credit shall be allowed in annual or interim statements required to be filed by such transferer or transferee in New York where the agreement has been executed or entered into after November 30, 1984, unless each of the following conditions is satisfied:
(a) The agreement shall provide that the obligations of the transferee are payable on the basis of the liability of the transferer without diminution because of the insolvency of the transferer.
(b) The agreement shall be noncancellable, except at the discretion of the superintendent acting as rehabilitator, liquidator or receiver of the transferer or transferee.
(c) The agreement shall not contain terms permitting, or operate to permit, the transferee to exercise influence over the claim settlement practices and procedures of the transferer by delay of payment of balances due or otherwise, except that, subject to the ultimate responsibility of the transferer, the transferee may participate in the defense of claims in a manner that shall not constitute unfair claim settlement practices.
(d) Recoveries due the transferer must be available without delay for payment of losses and claim obligations incurred under the agreement, in a manner not inconsistent with orderly payment of incurred policy obligations by the transferer.
(e) The agreement shall constitute the entire contract between the parties, and must provide no guarantees of any kind to the transferee by or on behalf of the transferer, whether directly, by side agreement, or otherwise.
(f) The agreement must provide for quarterly reports by the transferer to the transferee, setting forth the transferer's total loss and loss expense reserves on the policy obligations subject to the agreement, so that the respective obligations of transferer and transferee will be recorded and reported on a consistent basis in their respective annual and interim statements required to be filed in New York.
(g) The consideration to be paid by the transferer for the loss portfolio transfer must be a certain sum stated in the agreement.
(h) Direct or indirect commissions to the transferer or transferee are prohibited.
(i) Any provision for subsequent adjustment on the basis of actual experience in regard to the policy obligations transferred, or on the basis of any other formula, is prohibited in connection with a loss portfolio transfer, except that provision may be made for the transferer's participation in the transferee's ultimate profit, if any, under the agreement.
(j) If the transferee is not an authorized insurer or an accredited reinsurer in New York, a Letter of Credit acceptable under the terms of Part 79 of this Title (Regulation 133) must be furnished, or funds must be held by the transferer in a manner consistent with Part 126 of this Title (Regulation 114) and section 1301(a)(14) of the Insurance Law, in the amount of the remaining obligations of the transferee to the transferer under the agreement.
