Current through Register Vol. 54, No. 44, November 2, 2024
A licensed domestic ceding insurer will be allowed credit for
reinsurance as either an asset or a deduction from liability on account of
reinsurance ceded only when the reinsurer meets the requirements of this
section or as otherwise provided in §
161.7 (relating to credit for
joint underwriting or pooling arrangements).
(1) Credit will be allowed when the
reinsurance is ceded to an assuming insurer which is licensed to transact
insurance or reinsurance in this Commonwealth.
(2) Credit will be allowed when the
reinsurance is ceded to an assuming foreign insurer which has met the
conditions specified in this paragraph and has been deemed to be a qualified
reinsurer by the Commissioner. To be considered for qualification, an assuming
foreign insurer shall meet the following conditions. The insurer shall:
(i) File evidence of its submission to the
Commonwealth's jurisdiction with the Commissioner.
(ii) Submit to the Commonwealth's authority
to examine its books and records.
(iii) Be licensed to transact insurance or
reinsurance in at least one state, or in the case of a United States branch of
an alien assuming insurer be entered through and licensed to transact insurance
or reinsurance in at least one state. After 1994, one of the states in which
the insurer is licensed shall be an accredited state.
(iv) File with the application for
qualification and annually thereafter a copy of its annual statement filed with
the insurance department of its state of domicile and a copy of its most recent
audited financial statement.
(v)
Demonstrate to the satisfaction of the Commissioner that it has adequate
financial capacity to meet its reinsurance obligations and is otherwise
qualified to assume reinsurance from domestic insurers. An assuming insurer is
deemed to meet this requirement as of the time of its application if it
maintains a surplus as regards policyholders in an amount not less than $20
million and its qualification has not been denied by the Commissioner within 90
days after submission of its application.
(3) Credit will be allowed when the
reinsurance is ceded to an assuming alien insurer which has met the conditions
specified in this paragraph and has been deemed to be a qualified reinsurer by
the Commissioner. To be considered for qualification, an assuming alien insurer
shall meet the following conditions. The insurer shall:
(i) File with the Commissioner evidence of
its submission to the Commonwealth's jurisdiction.
(ii) Submit to the Commonwealth's authority
to examine its books and records.
(iii) File with the application for
qualification and annually thereafter substantially the same information as
that required to be reported on the NAIC annual statement blank by licensed
insurers.
(iv) File with the
application for qualification and annually thereafter details on the soundness
of its ceded reinsurance program, including the identity, domicile and premium
volume for each retrocessionaire when the amount of reinsurance premium ceded
is greater than or equal to $50,000. If the insurer demonstrates to the
Commissioner's satisfaction its inability to provide the requested detail with
respect to individual retrocessionaires because of its method of operation, the
Commissioner will consider the acceptability of alternative information
pertaining to the soundness of the insurer's ceded reinsurance
program.
(v) Agree to the
requirements of this subparagraph in the reinsurance agreements. This
subparagraph is not intended to conflict with or override the obligation of the
parties to a reinsurance agreement to arbitrate their disputes, if an
obligation is created in the agreement.
(A) In
the event of the failure of the assuming insurer to perform its obligations
under the terms of the reinsurance agreement, the assuming insurer shall at the
request of the ceding insurer:
(I) Submit to
the jurisdiction of a court of competent jurisdiction in a state of the United
States.
(II) Comply with the
requirements necessary to give the court jurisdiction.
(III) Abide by the final decision of the
court or of an appellate court in the event of an appeal.
(B) The assuming insurer shall designate a
person as its true and lawful agent upon whom may be served a lawful process in
an action, suit or proceeding instituted by or on behalf of the ceding
company.
(vi) Maintain a
trust fund in a qualified United States financial institution, for the payment
of valid claims of its United States policyholders and ceding insurers, their
assigns and successors in interest.
(A) In the
case of a single assuming insurer, the trust shall consist of a trusteed
account in an amount not less than the assuming insurer's liabilities
attributable to business directly written or assumed in the United States. In
addition, the assuming insurer shall maintain a trusteed surplus of at least
$20 million except as provided in this clause. At any time after the assuming
insurer has permanently discontinued underwriting new business secured by the
trust for at least 3 calendar years, the commissioner with principal regulatory
oversight of the trust may authorize a reduction in the required trusteed
surplus but only after a finding, based on an assessment of the risk, that the
new required surplus level is adequate for the protection of United States
ceding insurers, policyholders and claimants in light of reasonably foreseeable
adverse loss development. The risk assessment may involve an actuarial review,
including an independent analysis of reserves and cash flows, and will consider
material risk factors, including when applicable the lines of business
involved, the stability of the incurred loss estimates and the effect of the
surplus requirements on the assuming insurer's liquidity or solvency. The
minimum required trusteed surplus may not be reduced to an amount less than 30%
of the assuming insurer's liabilities attributable to reinsurance ceded by
United States ceding insurers covered by the trust.
(B) In the case of a group of insurers which
includes incorporated and unincorporated individual insurers, the trust shall
consist of a trusteed account not less than the respective insurers' several
liabilities attributable to business directly written or assumed in the United
States. In addition, the group shall maintain a trusteed surplus of which $100
million shall be held jointly for the benefit of United States ceding insurers
of any insurer of the group. The group shall make available to the Commissioner
an annual certification of the solvency of each insurer by the group's
domiciliary regulator and its independent public accountants.
(4) Credit will be
allowed when the reinsurance is ceded to a group of incorporated alien insurers
under common administration if the group has met the conditions specified in
this subsection and has been deemed to be a qualified reinsurer by the
Commissioner. To be considered for qualification, the group shall meet the
following conditions. The group shall:
(i)
Have continuously transacted an insurance business outside the United States
for at least 3 years immediately prior to applying for qualification.
(ii) File with the Commissioner evidence of
its submission to the Commonwealth's jurisdiction.
(iii) File with the application for
qualification and annually thereafter substantially the same information as
that required to be reported on the NAIC annual statement blank by licensed
insurers.
(iv) Submit to the
Commonwealth's authority to examine its books and records and bear the expense
of the examination.
(v) File with
the application for qualification and annually thereafter details on the
soundness of its ceded reinsurance program, including the identity, domicile
and premium volume for each retrocessionaire when the amount of reinsurance
premium ceded is greater than or equal to $50,000. If the insurer demonstrates
to the Commissioner's satisfaction its inability to provide the requested
detail with respect to individual retrocessionaires because of its method of
operation, the Commissioner will consider the acceptability of alternative
information pertaining to the soundness of the insurer's ceded reinsurance
program.
(vi) Maintain an aggregate
policyholder's surplus of at least $10 billion, calculated and reported in
substantially the same manner as prescribed by the annual statement
instructions and Accounting Practices and Procedures Manual of the
NAIC.
(vii) Maintain a trust fund
in a qualified United States financial institution for the payment of valid
claims of its United States policyholders and ceding insurers, their assigns
and successors in interest. The trust shall be in an amount not less than the
group's several liabilities attributable to business ceded by United States
ceding insurers to any member of the group pursuant to reinsurance contracts
issued in the name of the group. The group shall maintain a joint trusteed
surplus of which $100 million shall be held jointly for the benefit of United
States ceding insurers of any member of the group as additional security for
the liabilities. Each member of the group shall make available to the
Commissioner an annual certification of the member's solvency by the member's
domiciliary regulator and its independent public accountant.
(viii) Agree to the requirements of this
subparagraph in the reinsurance agreements. This subparagraph is not intended
to conflict with or override the obligation of the parties to a reinsurance
agreement to arbitrate their disputes, if an obligation is created in the
agreement.
(A) In the event of the failure of
the assuming insurer to perform its obligations under the terms of the
reinsurance agreement, at the request of the ceding insurer the assuming
insurer shall:
(I) Submit to the jurisdiction
of a court of competent jurisdiction in a state of the United States.
(II) Comply with requirements necessary to
give the court jurisdiction.
(III)
Abide by the final decision of the court or of an appellate court in the event
of an appeal.
(B) The
assuming insurer shall designate a person as its true and lawful agent upon
whom may be served a lawful process in an action, suit or proceeding instituted
by or on behalf of the ceding company.
(5) Credit will be allowed when the
reinsurance is ceded to an assuming insurer that has been certified by the
Commissioner as a reinsurer in this Commonwealth in accordance with §
161.3a (relating to requirements
for certified reinsurers) and secures its obligations in accordance with §
161.3b (relating to calculation of
credit for reinsurance regarding obligations secured with certified
reinsurers).
(6) Credit will be
allowed when the reinsurance is ceded to an assuming insurer that is not a
qualified reinsurer in an amount not exceeding the liabilities carried by the
ceding insurer in accordance with section 319.1(b) of the act (40 P. S. §
442.1(b)).
The provisions of this §161.3 amended under sections 206,
506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S.
§§
66,
186,
411 and
412); and section
319.1 of The Insurance Company Law
of 1921 (40 P. S. §
442.1).
This section cited in 31 Pa. Code §
161.3b (relating to calculation of
credit for reinsurance regarding obligations secured with certified
reinsurers); 31 Pa. Code §
161.4 (relating to trust fund
requirements); and 31 Pa. Code §
161.9 (relating to
application).
