Current through Supplement No. 394, October, 2024
1. No
licensed life insurer shall, for reinsurance ceded, reduce any liability or
establish any asset in any financial statement filed with this department if,
by the terms of the reinsurance agreement, in substance or effect, any of the
following conditions exist:
a. The primary
effect of the reinsurance agreement is to transfer deficiency reserves or
excess interest reserves to the books of the reinsurer for a "risk charge" and
the agreement does not provide for significant participation by the reinsurer
in one or more of the following risks: mortality, morbidity, investment, or
surrender benefit;
b. The reserve
credit taken by the ceding insurer is in excess of the actuarial reserve
necessary, under the North Dakota insurance law or rules, including actuarial
interpretations or standards adopted by the department, to support the policy
obligations transferred under the reinsurance agreement;
c. The reserve credit taken by the ceding
insurer is greater than the underlying reserve of the ceding company supporting
the policy obligations transferred under the reinsurance agreement;
d. The ceding insurer is required to
reimburse the reinsurer for negative experience under the reinsurance
agreement, except that neither offsetting experience refunds against prior
years' losses nor payment by the ceding insurer of an amount equal to prior
years' losses upon voluntary termination of inforce reinsurance by that ceding
insurer shall be considered such a reimbursement to the insurer for negative
experience;
e. The ceding insurer
can be deprived of surplus at the reinsurer's option or automatically upon the
occurrence of some event, such as the insolvency of the ceding insurer, except
that termination of the reinsurance agreement by the reinsurer for nonpayment
of reinsurance premiums shall not be considered to be such a deprivation of
surplus;
f. The ceding insurer
must, at specific points in time scheduled in the agreement, terminate or
automatically recapture all or part of the reinsurance ceded;
g. No cash payment is due from the reinsurer,
throughout the lifetime of the reinsurance agreement, with all settlements
prior to the termination date of the agreement made only in a "reinsurance
account", and no funds in such account are available for the payment of claims;
or
h. The reinsurance agreement
involves the possible payment by the ceding insurer to the reinsurer of amounts
other than from income reasonably expected from the reinsured policies.
2. Notwithstanding
subsection 1, a licensed life insurer may, with the prior approval of the
commissioner, take such reserve credit as the commissioner may deem consistent
with the insurance law or rules, including actuarial interpretations or
standards adopted by the department.
