Oregon Administrative Rules
Chapter 836 - DEPARTMENT OF CONSUMER AND BUSINESS SERVICES, INSURANCE REGULATION
Division 12 - CREDIT FOR REINSURANCE
Section 836-012-0048 - Credit for Reinsurance - Reciprocal Jurisdictions
Universal Citation: OR Admin Rules 836-012-0048
Current through Register Vol. 63, No. 9, September 1, 2024
(1) Pursuant to Oregon Laws 2021, chapter 204, section 2, the director shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that is licensed to write reinsurance by, and has its head office or is domiciled in, a Reciprocal Jurisdiction, and which meets the other requirements of this rule.
(2) A "Reciprocal Jurisdiction" is a jurisdiction, as designated by the director pursuant to section (4), that meets one of the following:
(a) A non-U.S.
jurisdiction that is subject to an in-force covered agreement with the United
States, each within its legal authority, or, in the case of a covered agreement
between the United States and the European Union, is a member state of the
European Union. For purposes of this section, a "covered agreement" is an
agreement entered into pursuant to the Dodd-Frank Wall Street Reform and
Consumer Protection Act, 31 U.S.C. - 313 and 314, that is currently in effect
or in a period of provisional application and addresses the elimination, under
specified conditions, of collateral requirements as a condition for entering
into any reinsurance agreement with a ceding insurer domiciled in this state or
for allowing the ceding insurer to recognize credit for reinsurance;
(b) A U.S. jurisdiction that meets the
requirements for accreditation under the NAIC financial standards and
accreditation program; or
(c) A
qualified jurisdiction, as determined by the director pursuant to ORS
731.511(5) and
OAR 836-012-0046(3),
which is not otherwise described in subsection (a) or (b) above and which the
director determines meets all of the following additional requirements:
(A) Provides that an insurer which has its
head office or is domiciled in such qualified jurisdiction shall receive credit
for reinsurance ceded to a U.S.-domiciled assuming insurer in the same manner
as credit for reinsurance is received for reinsurance assumed by insurers
domiciled in such qualified jurisdiction;
(B) Does not require a U.S.-domiciled
assuming insurer to establish or maintain a local presence as a condition for
entering into a reinsurance agreement with any ceding insurer subject to
regulation by the non-U.S. jurisdiction or as a condition to allow the ceding
insurer to recognize credit for such reinsurance;
(C) Recognizes the U.S. state regulatory
approach to group supervision and group capital, by providing written
confirmation by a competent regulatory authority, in such qualified
jurisdiction, that insurers and insurance groups that are domiciled or maintain
their headquarters in this state or another jurisdiction accredited by the NAIC
shall be subject only to worldwide prudential insurance group supervision
including worldwide group governance, solvency and capital, and reporting, as
applicable, by the director or the commissioner of the domiciliary state and
will not be subject to group supervision at the level of the worldwide parent
undertaking of the insurance or reinsurance group by the qualified
jurisdiction; and
(D) Provides
written confirmation by a competent regulatory authority in such qualified
jurisdiction that information regarding insurers and their parent, subsidiary,
or affiliated entities, if applicable, shall be provided to the director in
accordance with a memorandum of understanding or similar document between the
director and such qualified jurisdiction, including but not limited to the
International Association of Insurance Supervisors Multilateral Memorandum of
Understanding or other multilateral memoranda of understanding coordinated by
the NAIC.
(3) Credit shall be allowed when the reinsurance is ceded from an insurer domiciled in this state to an assuming insurer meeting each of the conditions set forth below.
(a) The assuming insurer must be
licensed to transact reinsurance by, and have its head office or be domiciled
in, a Reciprocal Jurisdiction.
(b)
The assuming insurer must have and maintain on an ongoing basis minimum capital
and surplus, or its equivalent, calculated on at least an annual basis as of
the preceding December 31 or at the annual date otherwise statutorily reported
to the Reciprocal Jurisdiction, and confirmed as set forth in section (3)(g)
according to the methodology of its domiciliary jurisdiction, in the following
amounts:
(A) No less than $250,000,000;
or
(B) If the assuming insurer is
an association, including incorporated and individual unincorporated
underwriters:
(i) Minimum capital and surplus
equivalents (net of liabilities) or own funds of the equivalent of at least
$250,000,000; and
(ii) A central
fund containing a balance of the equivalent of at least $250,000,000.
(c) The assuming
insurer must have and maintain on an ongoing basis a minimum solvency or
capital ratio, as applicable, as follows:
(A)
If the assuming insurer has its head office or is domiciled in a Reciprocal
Jurisdiction as defined in section (2)(a), the ratio specified in the
applicable covered agreement;
(B)
If the assuming insurer is domiciled in a Reciprocal Jurisdiction as defined in
section (2)(b), a risk-based capital (RBC) ratio of three hundred percent
(300%) of the authorized control level, calculated in accordance with the
formula developed by the NAIC; or
(C) If the assuming insurer is domiciled in a
Reciprocal Jurisdiction as defined in section (2)(c), after consultation with
the Reciprocal Jurisdiction and considering any recommendations published
through the NAIC Committee Process, such solvency or capital ratio as the
director determines to be an effective measure of solvency.
(d) The assuming insurer must
agree to and provide adequate assurance, in the form of a properly executed
Form RJ-1 (Exhibit 5, OAR
836-012-0000), of its agreement
to the following:
(A) The assuming insurer
must agree to provide prompt written notice and explanation to the director if
it falls below the minimum requirements set forth in subsections (b) or (c) of
this section, or if any regulatory action is taken against it for serious
noncompliance with applicable law.
(B) The assuming insurer must consent in
writing to the jurisdiction of the courts of this state and to the appointment
of the director as agent for service of process.
(i) The director may also require that such
consent be provided and included in each reinsurance agreement under the
director's jurisdiction.
(ii)
Nothing in this provision shall limit or in any way alter the capacity of
parties to a reinsurance agreement to agree to alternative dispute resolution
mechanisms, except to the extent such agreements are unenforceable under
applicable insolvency or delinquency laws.
(C) The assuming insurer must consent in
writing to pay all final judgments, wherever enforcement is sought, obtained by
a ceding insurer, that have been declared enforceable in the territory where
the judgment was obtained.
(D) Each
reinsurance agreement must include a provision requiring the assuming insurer
to provide security in an amount equal to one hundred percent (100%) of the
assuming insurer's liabilities attributable to reinsurance ceded pursuant to
that agreement if the assuming insurer resists enforcement of a final judgment
that is enforceable under the law of the jurisdiction in which it was obtained
or a properly enforceable arbitration award, whether obtained by the ceding
insurer or by its legal successor on behalf of its estate, if
applicable.
(E) The assuming
insurer must confirm that it is not presently participating in any solvent
scheme of arrangement, which involves this state's ceding insurers, and agrees
to notify the ceding insurer and the director and to provide one hundred
percent (100%) security to the ceding insurer consistent with the terms of the
scheme, should the assuming insurer enter into such a solvent scheme of
arrangement. Such security shall be in a form consistent with the provisions of
ORS 731.510 and
731.511 and OAR
836-012-0070,
836-012-0080 or
836-012-0090. For purposes of
this rule, the term "solvent scheme of arrangement" means a foreign or alien
statutory or regulatory compromise procedure subject to requisite majority
creditor approval and judicial sanction in the assuming insurer's home
jurisdiction either to finally commute liabilities of duly noticed classed
members or creditors of a solvent debtor, or to reorganize or restructure the
debts and obligations of a solvent debtor on a final basis, and which may be
subject to judicial recognition and enforcement of the arrangement by a
governing authority outside the ceding insurer's home jurisdiction.
(F) The assuming insurer must agree in
writing to meet the applicable information filing requirements as set forth in
subsection (e) of this section.
(e) The assuming insurer or its legal
successor must provide, if requested by the director, on behalf of itself and
any legal predecessors, the following documentation to the director:
(A) For the two years preceding entry into
the reinsurance agreement and on an annual basis thereafter, the assuming
insurer's annual audited financial statements, in accordance with the
applicable law of the jurisdiction of its head office or domiciliary
jurisdiction, as applicable, including the external audit report;
(B) For the two years preceding entry into
the reinsurance agreement, the solvency and financial condition report or
actuarial opinion, if filed with the assuming insurer's supervisor;
(C) Prior to entry into the reinsurance
agreement and not more than semi-annually thereafter, an updated list of all
disputed and overdue reinsurance claims outstanding for 90 days or more,
regarding reinsurance assumed from ceding insurers domiciled in the United
States; and
(D) Prior to entry into
the reinsurance agreement and not more than semi-annually thereafter,
information regarding the assuming insurer's assumed reinsurance by ceding
insurer, ceded reinsurance by the assuming insurer, and reinsurance recoverable
on paid and unpaid losses by the assuming insurer to allow for the evaluation
of the criteria set forth in subsection (f) of this section.
(f) The assuming insurer must
maintain a practice of prompt payment of claims under reinsurance agreements.
The lack of prompt payment will be evidenced if any of the following criteria
is met:
(A) More than fifteen percent (15%) of
the reinsurance recoverables from the assuming insurer are overdue and in
dispute as reported to the director;
(B) More than fifteen percent (15%) of the
assuming insurer's ceding insurers or reinsurers have overdue reinsurance
recoverable on paid losses of 90 days or more which are not in dispute and
which exceed for each ceding insurer $100,000, or as otherwise specified in a
covered agreement; or
(C) The
aggregate amount of reinsurance recoverable on paid losses which are not in
dispute, but are overdue by 90 days or more, exceeds $50,000,000, or as
otherwise specified in a covered agreement.
(g) The assuming insurer's supervisory
authority must confirm to the director on an annual basis that the assuming
insurer complies with the requirements set forth in subsections (b) and (c) of
this section.
(h) Nothing in this
provision precludes an assuming insurer from providing the director with
information on a voluntary basis.
(4) The director shall timely create and publish a list of Reciprocal Jurisdictions.
(a) A list of Reciprocal Jurisdictions is
published through the NAIC Committee Process. The director's list shall include
any Reciprocal Jurisdiction as defined under section (2)(a) and (b), and shall
consider any other Reciprocal Jurisdiction included on the NAIC list. The
director may approve a jurisdiction that does not appear on the NAIC list of
Reciprocal Jurisdictions as provided by applicable law, regulation, or in
accordance with criteria published through the NAIC Committee
Process.
(b) The director may
remove a jurisdiction from the list of Reciprocal Jurisdictions upon a
determination that the jurisdiction no longer meets one or more of the
requirements of a Reciprocal Jurisdiction, as provided by applicable law,
regulation, or in accordance with a process published through the NAIC
Committee Process, except that the director shall not remove from the list a
Reciprocal Jurisdiction as defined under section (2)(a) and (b). Upon removal
of a Reciprocal Jurisdiction from this list credit for reinsurance ceded to an
assuming insurer domiciled in that jurisdiction shall be allowed, if otherwise
allowed pursuant to ORS
731.509 to
731.514 and Oregon Laws 2021,
chapter 204, section 2.
(5) The director shall timely create and publish a list of assuming insurers that have satisfied the conditions set forth in this rule and to which cessions shall be granted credit in accordance with this rule.
(a) If an NAIC accredited
jurisdiction has determined that the conditions set forth in section (3) have
been met, the director has the discretion to defer to that jurisdiction's
determination, and add such assuming insurer to the list of assuming insurers
to which cessions shall be granted credit in accordance with this section. The
director may accept financial documentation filed with another NAIC accredited
jurisdiction or with the NAIC in satisfaction of the requirements of section
(3).
(b) When requesting that the
director defer to another NAIC accredited jurisdiction's determination, an
assuming insurer must submit a properly executed Form RJ-1 and additional
information as the director may require. A state that has received such a
request will notify other states through the NAIC Committee Process and provide
relevant information with respect to the determination of
eligibility.
(6) If the director determines that an assuming insurer no longer meets one or more of the requirements under this rule, the director may revoke or suspend the eligibility of the assuming insurer for recognition under this rule.
(a) While an assuming insurer's eligibility
is suspended, no reinsurance agreement issued, amended or renewed after the
effective date of the suspension qualifies for credit except to the extent that
the assuming insurer's obligations under the contract are secured in accordance
with OAR 836-012-0060.
(b) If an assuming insurer's eligibility is
revoked, no credit for reinsurance may be granted after the effective date of
the revocation with respect to any reinsurance agreements entered into by the
assuming insurer, including reinsurance agreements entered into prior to the
date of revocation, except to the extent that the assuming insurer's
obligations under the contract are secured in a form acceptable to the director
and consistent with the provisions of OAR
836-012-0060.
(7) Before denying statement credit or imposing a requirement to post security with respect to this rule or adopting any similar requirement that will have substantially the same regulatory impact as security, the director shall:
(a) Communicate with the ceding insurer, the
assuming insurer, and the assuming insurer's supervisory authority that the
assuming insurer no longer satisfies one of the conditions listed in section
(3);
(b) Provide the assuming
insurer with 30 days from the initial communication to submit a plan to remedy
the defect, and 90 days from the initial communication to remedy the defect,
except in exceptional circumstances in which a shorter period is necessary for
policyholder and other consumer protection;
(c) After the expiration of 90 days or less,
as set out in subsection (b), if the director determines that no or
insufficient action was taken by the assuming insurer, the director may impose
any of the requirements as set out in this section; and
(d) Provide a written explanation to the
assuming insurer of any of the requirements set out in this section.
(8) If subject to a legal process of rehabilitation, liquidation or conservation, as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring that the assuming insurer post security for all outstanding liabilities.
Statutory/Other Authority: ORS 731.244, ORS 731.508 - 731.514 & Or Laws 2021, ch 204, sec 2
Statutes/Other Implemented: ORS 731.508 - 731.514 & Or Laws 2021, ch 204, sec 2
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