Current through Register Vol. 48, 12, December 27, 2024
Section I.
Purpose.
The purpose of this regulation is to set forth rules and
procedural requirements which the director or his designee deems necessary to
carry out the provisions of Sections
38-9-190
through
38-9-220.
The actions and information required by this regulation are hereby declared to
be necessary and appropriate in the public interest and for the protection of
the ceding insurers in this State.
Section II. Severability.
If any provisions of this regulation, or the application of the
provision to any person or circumstance, is held invalid, the remainder of the
regulation, and the application of the provisions to persons or circumstances
other than those to which it is held invalid, shall not be affected.
Section III. Reinsurer licensed in
this state.
Pursuant to Section
38-9-200(B),
the director or his designee shall allow credit for reinsurance ceded by a
domestic insurer to an assuming insurer which was licensed in this State as of
any date on which statutory financial statement credit for reinsurance is
claimed.
Section IV.
Accredited reinsurers.
A. Pursuant to Section
38-9-200(C),
the director or his designee shall allow credit for reinsurance ceded by a
domestic insurer to an assuming insurer which is accredited as a reinsurer in
this State as of any date on which statutory financial statement credit for
reinsurance is claimed. An accredited reinsurer must:
1. File a properly executed Form AR-1
(attached as an exhibit to this regulation) as evidence of its submission to
this State's jurisdiction and to this State's authority to examine its books
and records;
2. File with the
director or his designee a certified copy of a certificate of authority or
other acceptable evidence that it is 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, is entered through and licensed to transact
insurance or reinsurance in at least one state;
3. File annually with the director or his
designee a copy of its annual statement filed with the insurance department of
its state of domicile or, in the case of an alien assuming insurer, with the
state through which it is entered and in which it is licensed to transact
insurance or reinsurance, and a copy of its most recent audited financial
statement: and
4.
a. Maintain a surplus as regards
policyholders in an amount not less than $20,000,000 and whose accreditation
has not been denied by the director or his designee within ninety (90) days of
its submission; or
b. Maintain a
surplus as regards policyholders of less than $20,000,000, and whose
accreditation has been approved by the director or his designee.
B. If the director or
his designee determines that the assuming insurer has failed to meet or
maintain any of these qualifications, the director or his designee may upon
written notice and hearing revoke the accreditation. Credit shall not be
allowed a domestic ceding insurer if the assuming insurer's accreditation has
been revoked by the director or his designee or if the reinsurance was ceded
while the assuming insurer's accreditation was under suspension by the director
or his designee.
Section
V. Reinsurer domiciled and licensed in another state.
A. Pursuant to Section
38-9-200(D),
the director or his designee shall allow credit for reinsurance ceded by a
domestic insurer to an assuming insurer which as of any date on which statutory
financial statement credit for reinsurance is claimed:
1. Is domiciled in (or, in the case of a
United States branch of an alien assuming insurer, is entered through) a state
which employs standards regarding credit for reinsurance substantially similar
to those applicable under the Code and this regulation;
2. Maintains a surplus as regards
policyholders in an amount not less than $20,000,000: and
3. Files a properly executed Form AR-1 with
the director or his designee as evidence of its submission to this State's
authority to examine its books and records.
B. The provisions of this section relating to
surplus as regards policyholders shall not apply to reinsurance ceded and
assumed pursuant to pooling arrangements among insurers in the same holding
company system. As used in this section, "substantially similar" standards
means credit for reinsurance standards which the director or his designee
determines equal or exceed the standards of the Code and this
regulation.
Section VI.
Reinsurers maintaining trust funds.
A.
Pursuant to Section
38-9-200(E),
the director or his designee shall allow credit for reinsurance ceded by a
domestic insurer to an assuming insurer which, as of any date on which
statutory financial statement credit for reinsurance is claimed, and thereafter
for so long as credit for reinsurance is claimed, maintains a trust fund in an
amount prescribed below in a qualified United States financial institution as
defined in Section
38-9-220,
for the payment of the valid claims of its United States domiciled ceding
insurers, their assigns and successors in interest. The assuming insurer shall
report annually to the director or his designee substantially the same
information as that required to be reported on the National Association of
Insurance Commissioners annual statement form by licensed insurers, to enable
the director or his designee to determine the sufficiency of the trust
fund.
B. The following requirements
apply to the following categories of assuming insurer:
1. The trust fund for a single assuming
insurer shall consist of funds in trust in an amount not less than the assuming
insurer's liabilities attributable to reinsurance ceded by U.S. domiciled
insurers, and in addition, the assuming insurer shall maintain a trusteed
surplus of not less than $20,000,000, except as provided in Paragraph 2 of this
subsection.
2. At any time after
the assuming insurer has permanently discontinued underwriting new business
secured by trust for at least 3 full years, the director or his designee 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
U.S. ceding insurers, policyholders and claimants in light of reasonably
foreseeable adverse loss development. The risk assessment may involve actuarial
review, including an independent analysis of reserves and cash flows, and shall
consider all 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
thirty percent (30%) of the assuming insurer's liabilities attributable to
reinsurance ceded by U.S. ceding insurers covered by the trust.
3.
a. The
trust fund for a group including incorporated and individual unincorporated
underwriters shall consist of:
(1) For
reinsurance ceded under reinsurance agreements with an inception, amendment or
renewal date on or after January 1, 1993, funds in trust in an amount not less
than the group's several liabilities attributable to business ceded by U. S.
domiciled ceding insurers to any member of the group;
(2) For reinsurance ceded under reinsurance
agreements with an inception date on or before December 31, 1992, and not
amended or renewed after that date, notwithstanding the other provisions of
this regulation, funds in trust in an amount not less than the group's several
insurance and reinsurance liabilities attributable to business written in the
United States: and
(3) In addition
to these trusts, the group shall maintain a trusteed surplus of which
$100,000,000 shall be held jointly for the benefit of the U. S. domiciled
ceding insurers of any member of the group for all the years of
account.
b. The
incorporated members of the group shall not be engaged in any business other
than underwriting as a member of the group and shall be subject to the same
level of regulation and solvency control by the group's domiciliary regulator
as are the unincorporated members. The group shall, within ninety (90) days
after its financial statements are due to be filed with the group's domiciliary
regulator, provide to the director or his designee:
(1) An annual certification by the group's
domiciliary regulator of the solvency of each underwriter member of the group:
or
(2) If a certification is
unavailable, a financial statement, prepared by independent public accountants,
of each underwriter member of the group.
4.
a. The
trust fund for a group of incorporated insurers under common administration,
whose members possess aggregate policyholders surplus of $10,000,000,000
(calculated and reported in substantially the same manner as prescribed by the
annual statement instructions and Accounting Practices and Procedures Manual of
the NAIC) and which has continuously transacted an insurance business outside
the United States for at least three (3) years immediately prior to making
application for accreditation, shall:
(1)
Consist of funds in trust in an amount not less than the assuming insurers'
several liabilities attributable to business ceded by U. S. domiciled ceding
insurers to any members of the group pursuant to reinsurance contracts issued
in the name of such group and;
(2)
Maintain a joint trusteed surplus of which $100,000,000 shall be held jointly
for the benefit of U.S. domiciled ceding insurers of any member of the group:
and
(3) File a properly executed
Form AR-1 as evidence of the submission to this State's authority to examine
the books and records of any of its members and shall certify that any member
examined will bear the expense of any such examination.
b. Within ninety (90) days after the
statements are due to be filed with the group's domiciliary regulator, the
group shall file with the director or his designee an annual certification of
each underwriter member's solvency by the member's domiciliary regulators, and
financial statements, prepared by independent public accountants, of each
underwriter member of the group.
C.
1.
Credit for reinsurance shall not be granted unless the form of the trust and
any amendments to the trust have been approved by either the commissioner of
the state where the trust is domiciled or the commissioner of another state
who, pursuant to the terms of the trust instrument, has accepted responsibility
for regulatory oversight of the trust. The form of the trust and any trust
amendments also shall be filed with the commissioner of every state in which
the ceding insurer beneficiaries of the trust are domiciled. The trust
instrument shall provide that:
a. Contested
claims shall be valid and enforceable out of funds in trust to the extent
remaining unsatisfied thirty (30) days after entry of the final order of any
court of competent jurisdiction in the United States;
b. Legal title to the assets of the trust
shall be vested in the trustee for the benefit of the grantor's United States
ceding insurers, their assigns and successors in interest;
c. The trust shall be subject to examination
as determined by the director or his designee;
d. The trust shall remain in effect for as
long as the assuming insurer, or any member or former member of a group of
insurers, shall have outstanding obligations under reinsurance agreements
subject to the trust;
e. No later
than February 28 of each year the trustees of the trust shall report to the
director or his designee in writing setting forth the balance in the trust and
listing the trust's investments at the preceding year end, and shall certify
the date of termination of the trust, if so planned, or certify that the trust
shall not expire prior to the following December 31.
2.
a.
Notwithstanding any other provisions in the trust instrument, if the trust fund
is inadequate because it contains an amount less than the amount required by
this subsection or if the grantor of the trust has been declared insolvent or
placed into receivership, rehabilitation, liquidation or similar proceedings
under the laws of its state or country of domicile, the trustee shall comply
with an order of the commissioner with regulatory oversight over the trust or
with an order of a court of competent jurisdiction directing the trustee to
transfer to the commissioner with regulatory oversight over the trust or other
designated receiver all of the assets of the trust fund.
b. The assets shall be distributed by and
claims shall be filed with and valued by the commissioner with regulatory
oversight over the trust in accordance with the laws of the state in which the
trust is domiciled applicable to the liquidation of domestic insurance
companies.
c. If the commissioner
with regulatory oversight over the trust determines that the assets of the
trust fund or any part thereof are not necessary to satisfy the claims of the
U. S. beneficiaries of the trust, the commissioner with regulatory oversight
over the trust shall return the assets, or any part thereof, to the trustee for
distribution in accordance with the trust agreement.
d. The grantor shall waive any right
otherwise available to it under U.S. law that is inconsistent with this
provision.
D.
For purposes of this regulation, the term "liabilities" shall mean the assuming
insurer's gross liabilities attributable to reinsurance ceded by U. S.
domiciled insurers that are not otherwise secured by acceptable means, and,
shall include:
1. For business ceded by
domestic insurers authorized to write accident and health, and property and
casualty insurance:
a. Losses and allocated
loss expenses paid by the ceding insurer, recoverable from the assuming
insurer;
b. Reserves for losses
reported and outstanding;
c.
Reserves for losses incurred but not reported;
d. Reserves for allocated loss expenses:
and
2. For business ceded by domestic
insurers authorized to write life, health and annuity insurance:
a. Aggregate reserves for life policies and
contracts net of policy loans and net due and deferred premiums;
b. Aggregate reserves for accident and health
policies;
c. Deposit funds and
other liabilities without life or disability contingencies: and
d. Liabilities for policy and contract
claims.
E.
Assets deposited in trusts established pursuant to Section
38-9-200
and this section shall be valued according to their fair market value and shall
consist only of cash in U. S. dollars, certificates of deposit issued by a U.S.
financial institution as defined in Section
38-9-220,
clean, irrevocable, unconditional and "evergreen" letters of credit issued or
confirmed by a qualified U.S. financial institution, as defined in Section
38-9-220,
and investments of the type specified in this subsection, but investments in or
issued by an entity controlling, controlled by or under common control with
either the grantor or beneficiary of the trust shall not exceed five percent
(5%) of total investments. No more than twenty percent (20%) of the total of
the investments in the trust may be foreign investments authorized under
Paragraphs 1.e., 3, 6.b. or 7 of this subsection, and no more than ten percent
(10%) of the total of the investments in the trust may be securities
denominated in foreign currencies. For purposes of applying the preceding
sentence, a depository receipt denominated in U. S. dollars and representing
rights conferred by a foreign security shall be classified as a foreign
investment denominated in a foreign currency. The assets of a trust established
to satisfy the requirements of Section
38-9-200
shall be invested only as follows:
1.
Government obligations that are not in default as to principal or interest,
that are valid and legally authorized and that are issued, assumed or
guaranteed by:
a. The United States or by any
agency or instrumentality of the United States;
b. A state of the United States;
c. A territory, possession or other
governmental unit of the United States;
d. An agency or instrumentality of a
governmental unit referred to in Subparagraphs (b) and (c) of this paragraph if
the obligations shall be by law (statutory or otherwise) payable, as to both
principal and interest, from taxes levied or by law required to be levied or
from adequate special revenues pledged or otherwise appropriated or by law
required to be provided for making these payments, but shall not be obligations
eligible for investment under this paragraph if payable solely out of special
assessments on properties benefited by local improvements: or
e. The government of any other country that
is a member of the Organization for Economic Cooperation and Development and
whose government obligations are rated A or higher, or the equivalent, by a
rating agency recognized by the Securities Valuation Office of the
NAIC;
2. Obligations
that are issued in the United States, or that are dollar denominated and issued
in a non-U.S. market, by a solvent U. S. institution (other than an insurance
company) or that are assumed or guaranteed by a solvent U. S. institution
(other than an insurance company) and that are not in default as to principal
or interest if the obligations:
a. Are rated A
or higher (or the equivalent) by a securities rating agency recognized by the
Securities Valuation Office of the NAIC, or if not so rated, are similar in
structure and other material respects to other obligations of the same
institution that are so rated;
b.
Are insured by at least one authorized insurer (other than the investing
insurer or a parent, subsidiary or affiliate of the investing insurer) licensed
to insure obligations in this state and, after considering the insurance, are
rated AAA (or the equivalent) by a securities rating agency recognized by the
Securities Valuation Office of the NAIC: or
c. Have been designated as Class One or Class
Two by the Securities Valuation Office of the NAIC;
3. Obligations issued, assumed or guaranteed
by a solvent non-U.S. institution chartered in a country that is a member of
the Organization for Economic Cooperation and Development or obligations of
U.S. corporations issued in a non-U.S. currency, provided that in either case
the obligations are rated A or higher, or the equivalent, by a rating agency
recognized by the Securities Valuation Office of the NAIC;
4. An investment made pursuant to the
provisions of Paragraph 1, 2 or 3 of this subsection shall be subject to the
following additional limitations:
a. An
investment in or loan upon the obligations of an institution other than an
institution that issues mortgage-related securities shall not exceed five
percent (5%) of the assets of the trust;
b. An investment in any one mortgage-related
security shall not exceed five percent (5%) of the assets of the
trust;
c. The aggregate total
investment in mortgage-related securities shall not exceed twenty-five percent
(25%) of the assets of the trust: and
d. Preferred or guaranteed shares issued or
guaranteed by a solvent U. S. institution are permissible investments if all of
the institution's obligations are eligible as investments under Paragraphs
(2)(a) and (2)(c) of this subsection, but shall not exceed two percent (2%) of
the assets of the trust.
5. As used in this regulation:
a. "Mortgage-related security" means an
obligation that is rated AA or higher (or the equivalent) by a securities
rating agency recognized by the Securities Valuation Office of the NAIC and
that either:
(1) Represents ownership of one
or more promissory notes or certificates of interest or participation in the
notes (including any rights designed to assure servicing of, or the receipt or
timeliness of receipt by the holders of the notes, certificates, or
participation of amounts payable under, the notes, certificates or
participation), that:
(i) Are directly secured
by a first lien on a single parcel of real estate, including stock allocated to
a dwelling unit in a residential cooperative housing corporation, upon which is
located a dwelling or mixed residential and commercial structure, or on a
residential manufactured home as defined in
42
U.S.C. Section 5402(6),
whether the manufactured home is considered real or personal property under the
laws of the state in which it is located: and
(ii) Were originated by a savings and loan
association, savings bank, commercial bank, credit union, insurance company, or
similar institution that is supervised and examined by a federal or state
housing authority, or by a mortgagee approved by the Secretary of Housing and
Urban Development pursuant to
12 U.S.C. Sections
1709 and
1715
-b, or, where the notes involve a lien on the manufactured home, by an
institution or by a financial institution approved for insurance by the
Secretary of Housing and Urban Development pursuant to
12 U.S.C. Section
1703: or
(2) Is secured by one or more promissory
notes or certificates of deposit or participations in the notes (with or
without recourse to the insurer of the notes) and, by its terms, provides for
payments of principal in relation to payments, or reasonable projections of
payments, or notes meeting the requirements of Items (1)(i) and (1)(ii) of this
subsection;
b.
"Promissory note," when used in connection with a manufactured home, shall also
include a loan, advance or credit sale as evidenced by a retail installment
sales contract or other instrument.
6. Equity interests
a. Investments in common shares or
partnership interests of a solvent U. S. institution are permissible if:
(1) Its obligations and preferred shares, if
any, are eligible as investments under this subsection: and
(2) The equity interests of the institution
(except an insurance company) are registered on a national securities exchange
as provided in the Securities Exchange Act of 1934,
15
U.S.C. Sections 78a to
78kk
or otherwise registered pursuant to that Act, and if otherwise registered,
price quotations for them are furnished through a nationwide automated
quotations system approved by the Financial Industry Regulatory Authority, or
successor organization. A trust shall not invest in equity interests under this
paragraph an amount exceeding one percent (1%) of the assets of the trust even
though the equity interests are not so registered and are not issued by an
insurance company;
b.
Investments in common shares of a solvent institution organized under the laws
of a country that is a member of the Organization for Economic Cooperation and
Development, if:
(1) All its obligations are
rated A or higher, or the equivalent, by a rating agency recognized by the
Securities Valuation Office of the NAIC: and
(2) The equity interests of the institution
are registered on a securities exchange regulated by the government of a
country that is a member of the Organization for Economic Cooperation and
Development;
c. An
investment in or loan upon any one institution's outstanding equity interests
shall not exceed one percent (1%) of the assets of the trust. The cost of an
investment in equity interests made pursuant to this paragraph, when added to
the aggregate cost of other investments in equity interests then held pursuant
to this paragraph, shall not exceed ten percent (10%) of the assets in the
trust;
7. Obligations
issued, assumed or guaranteed by a multinational development bank, provided the
obligations are rated A or higher, or the equivalent, by a rating agency
recognized by the Securities Valuation Office of the NAIC.
8. Investment companies
a. Securities of an investment company
registered pursuant to the Investment Company Act of 1940, 15 U.S.C. Section
80a are permissible investments if the investment company:
(1) Invests at least ninety percent (90%) of
its assets in the types of securities that qualify as an investment under
Paragraph 1, 2 or 3 of this subsection or invests in securities that are
determined by the director or his designee to be substantively similar to the
types of securities set forth in Paragraph 1, 2 or 3 of this subsection:
or
(2) Invests at least ninety
percent (90%) of its assets in the types of equity interests that qualify as an
investment under Paragraph 6.a. of this subsection;
b. Investments made by a trust in investment
companies under this paragraph shall not exceed the following limitations:
(1) An investment in an investment company
qualifying under Subparagraph a.(1) of this paragraph shall not exceed ten
percent (10%) of the assets in the trust and the aggregate amount of investment
in qualifying investment companies shall not exceed twenty-five percent (25%)
of the assets in the trust: and
(2)
Investments in an investment company qualifying under Subparagraph a.(2) of
this paragraph shall not exceed five percent (5%) of the assets in the trust
and the aggregate amount of investment in qualifying investment companies shall
be included when calculating the permissible aggregate value of equity
interests pursuant to Paragraph 6.a. of this subsection.
9. Letters of Credit
a. In order for a letter of credit to qualify
as an asset of the trust, the trustee shall have the right and the obligation
pursuant to the deed of trust or some other binding agreement (as duly approved
by the director or his designee), to immediately draw down the full amount of
the letter of credit and hold the proceeds in trust for the beneficiaries of
the trust if the letter of credit will otherwise expire without being renewed
or replaced.
b. The trust agreement
shall provide that the trustee shall be liable for its negligence, willful
misconduct or lack of good faith. The failure of the trustee to draw against
the letter of credit in circumstances where such draw would be required shall
be deemed to be negligence and/or willful misconduct.
F. A specific security provided to
a ceding insurer by an assuming insurer pursuant to Section X of this
regulation shall be applied, until exhausted, to the payment of liabilities of
the assuming insurer to the ceding insurer holding the specific security prior
to, and as a condition precedent for, presentation of a claim by the ceding
insurer for payment by a trustee of a trust established by the assuming insurer
pursuant to this section.
Section
VII. Credit for reinsurance required by law.
Pursuant to Section
38-9-200(H),
the director or his designee shall allow credit for reinsurance ceded by a
domestic insurer to an assuming insurer not meeting the requirements of
Sections
38-9-200(B),
(C), (D), (E), (F), or (G) but only as to the
insurance of risks located in jurisdictions where the reinsurance is required
by the applicable law or regulation of that jurisdiction. As used in this
section, "jurisdiction" means state, district or territory of the United States
and any lawful national government.
Section VIII. Credit for Reinsurance -
Certified Reinsurers
A. Pursuant to South
Carolina Code Section
38-9-200(F)
the director or his designee shall allow credit for reinsurance ceded by a
domestic insurer to an assuming insurer that has been certified as a reinsurer
in this state at all times for which statutory financial statement credit for
reinsurance is claimed under this section. The credit allowed shall be based
upon the security held by or on behalf of the ceding insurer in accordance with
a rating assigned to the certified reinsurer by the director. The security
shall be in a form consistent with the provisions of South Carolina Code
Sections
38-9-200(F)
and
38-9-210
and XI, XII, or XIII of this Regulation. The amount of security required in
order for full credit to be allowed shall correspond with the following
requirements:
1. |
Ratings |
Security Required |
Secure - 1 |
0% |
Secure - 2 |
10% |
Secure - 3 |
20% |
Secure - 4 |
50% |
Secure - 5 |
75% |
Vulnerable - 6 |
100% |
2. Affiliated
reinsurance transactions shall receive the same opportunity for reduced
security requirements as all other reinsurance transactions.
3. The director or his designee shall require
the certified reinsurer to post one hundred percent (100%), for the benefit of
the ceding insurer or its estate, security upon the entry of an order of
rehabilitation, liquidation or conservation against the ceding
insurer.
4. In order to facilitate
the prompt payment of claims, a certified reinsurer shall not be required to
post security for catastrophe recoverables for a period of one year from the
date of the first instance of a liability reserve entry by the ceding company
as a result of a loss from a catastrophic occurrence as recognized by the
director or his designee. The one year deferral period is contingent upon the
certified reinsurer continuing to pay claims in a timely manner. Reinsurance
recoverables for only the following lines of business as reported on the NAIC
annual financial statement related specifically to the catastrophic occurrence
will be included in the deferral:
Line 1: Fire
Line 2: Allied Lines
Line 3: Farmowners multiple peril
Line 4: Homeowners multiple peril
Line 5: Commercial multiple peril
Line 9: Inland Marine
Line 12: Earthquake
Line 21: Auto physical damage
5. Credit for reinsurance under this section
shall apply only to reinsurance contracts entered into or renewed on or after
the effective date of the certification of the assuming insurer. Any
reinsurance contract entered into prior to the effective date of the
certification of the assuming insurer that is subsequently amended after the
effective date of the certification of the assuming insurer, or a new
reinsurance contract, covering any risk for which collateral was provided
previously, shall only be subject to this section with respect to losses
incurred and reserves reported from and after the effective date of the
amendment or new contract.
6.
Nothing in this section shall prohibit the parties to a reinsurance agreement
from agreeing to provisions establishing security requirements that exceed the
minimum security requirements established for certified reinsurers under this
section.
B.
Certification Procedure.
1. The director or
his designee shall post notice on the insurance department's website promptly
upon receipt of any application for certification, including instructions on
how members of the public may respond to the application. The director or his
designee may not take final action on the application until at least thirty
(30) days after posting the notice required by this paragraph.
2. The director or his designee shall issue
written notice to an assuming insurer that has made application and been
approved as a certified reinsurer. Included in such notice shall be the rating
assigned the certified reinsurer in accordance with Subsection A of this
section. The director or his designee shall publish a list of all certified
reinsurers and their ratings.
3. In
order to be eligible for certification, the assuming insurer shall meet the
following requirements:
a. The assuming
insurer must be domiciled and licensed to transact insurance or reinsurance in
a Qualified Jurisdiction, as determined by the director or his designee
pursuant to Subsection C of this section.
b. The assuming insurer must maintain capital
and surplus, or its equivalent, of no less than $250,000,000 calculated in
accordance with Subparagraph (4)(h) of this subsection. This requirement may
also be satisfied by an association including incorporated and individual
unincorporated underwriters having minimum capital and surplus equivalents (net
of liabilities) of at least $250,000,000 and a control fund containing a
balance of at least $250,000,000.
c. The assuming insurer must maintain
financial strength ratings from two or more rating agencies deemed acceptable
by the director or his designee. These ratings shall be based on interactive
communication between the rating agency and the assuming insurer and shall not
be based solely on publicly available information. These financial strength
ratings will be one factor used by the director in determining the rating that
is assigned to the assuming insurer. Acceptable rating agencies include the
following:
(ii) Moody's Investors
service;
(iv) A.M. Best Company;
or
(v) Any other Nationally
Recognized Statistical Rating Organization.
d. The certified reinsurer must comply with
any other requirements reasonably imposed by the director or his
designee.
4. Each
certified reinsurer shall be rated on a legal entity basis, with due
consideration being given to the group rating where appropriate, except that an
association including incorporated and individual unincorporated underwriters
that has been approved to do business as a single certified reinsurer may be
evaluated on the basis of its group rating. Factors that may be considered as
part of the evaluation process include, but are not limited to, the following:
a. The certified reinsurer's financial
strength rating from an acceptable rating agency. The maximum rating that a
certified reinsurer may be assigned will correspond to its financial strength
rating as outlined in the table below. The director or his designee shall use
the lowest financial strength rating received from an approved rating agency in
establishing the maximum rating of a certified reinsurer. A failure to obtain
or maintain at least two financial strength ratings from acceptable rating
agencies will result in loss of eligibility for certification:
Ratings |
Best |
S&P |
Moody's |
Fitch |
Secure - 1 |
A++ |
AAA |
Aaa |
AAA |
Secure - 2 |
A+ |
AA+, AA, AA- |
Aa1, Aa2, Aa3 |
AA+, AA, AA- |
Secure - 3 |
A |
A+, A |
A1, A2 |
A+. A |
Secure - 4 |
A- |
A- |
A3 |
A- |
Secure - 5 |
B++, B+ |
BBB+, BBB, BBB- |
Baa1, Baa2, Baa3 |
BBB+, BBB, BBB- |
Vulnerable - 6 |
B, B-, C++, C+, C, C-, D, E, F |
BB+, BB, BB-, B+, B, B-, CCC, CC, C, D,
R |
Ba1, Ba2, Ba3, B1, B2, B3, Caa, Ca, C |
BB+, BB, BB-, B+, B, B-, CCC+, CC, CCC-, DD |
b. The
business practices of the certified reinsurer in dealing with its ceding
insurers, including its record of compliance with reinsurance contractual terms
and obligations;
c. For certified
reinsurers domiciled in the U.S., a review of the most recent applicable NAIC
annual statement Blank, either Schedule F (for property/casualty reinsurers) or
Schedule S (for life and health reinsurer);
d. For certified reinsurers not domiciled in
the U.S., a review annually of Form CR-F (for property/casualty reinsurers) or
Form CR-S (for life and health reinsurers)(attached as exhibits to this
regulation);
e. The reputation of
the certified reinsurer for prompt payment of claims under reinsurance
agreements, based on an analysis of ceding insurers' Schedule F reporting of
overdue reinsurance recoverables, including the proportion of obligations that
are more than ninety (90) days past due or are in dispute, with specific
attention given to obligations payable to companies that are in administrative
supervision or receivership;
f.
Regulatory actions against the certified reinsurer;
g. The report of the independent auditor on
the financial statement of the insurance enterprise, on the basis described in
paragraph (h) below;
h. For
certified reinsurers not domiciled in the U.S., audited financial statements
regulatory filings, and actuarial opinion (as filed with the non-U.S.
jurisdiction supervisor, with a translation into English). Upon the initial
application for certification, the director or his designee will consider
audited financial statements for the last two (2) years filed with its non-U.S.
jurisdiction supervisor;
i. The
liquidation priority of obligations to a ceding insurer in the certified
reinsurer's domiciliary jurisdiction in the context of an insolvency
proceeding;
j. A certified
reinsurer's participation in any solvent scheme of arrangement, or similar
procedure, which involves U.S. ceding insurers. The director shall receive
prior notice from a certified reinsurer that proposes participation by the
certified reinsurer in a solvent scheme of arrangement; and
k. Any other information deemed relevant by
the director or his designee.
5. Based on the analysis conducted under
Subparagraph (4)(e) of a certified reinsurer's reputation for prompt payment of
claims, the director or his designee may make appropriate adjustments in the
security the certified reinsurer is required to post to protect its liabilities
to U.S. ceding insurers, provided that the director or his designee shall, at a
minimum, increase the security the certified reinsurer is required to post by
one rating level under Subparagraph (4)(a) if the director or his designee
finds that:
a. More than fifteen percent (15%)
of the certified reinsurer's ceding insurance clients have overdue reinsurance
recoverables on paid losses of ninety (90) days or more which are not in
dispute and which exceed $100,000 for each cedent; or
b. The aggregate amount of reinsurance
recoverables on paid losses which are not in dispute that are overdue by ninety
(90) days or more exceeds $50,000,000.
6. The assuming insurer must submit a
properly executed Form CR-1 (attached as an exhibit to this regulation) as
evidence of its submission to the jurisdiction of this state, appointment of
the director or his designee as an agent for the service of process in this
state, and agreement to provide security for one hundred percent (100%) of the
assuming insurer's liabilities attributable to reinsurance ceded by U.S. ceding
insurers if it resists enforcement of a final U.S. judgment. The director or
his designee shall not certify any assuming insurer that is domiciled in a
jurisdiction that the director or his designee has determined does not
adequately and promptly enforce final U.S. judgments or arbitration
awards.
7. The certified reinsurer
must agree to meet applicable information filing requirements as determined by
the director or his designee, both with respect to an initial application for
certification and on an ongoing basis. All information submitted by certified
reinsurers which are not otherwise public information subject to disclosure
shall be exempted from disclosure under S.C. Code of Laws Section
30-4-10
et. seq. and shall be withheld from public disclosure. The applicable
information filing requirements are, as follows:
a. Notification within ten (10) days of any
regulatory actions taken against the certified reinsurer, any change in the
provisions of its domiciliary license or any change in rating by an approved
rating agency, including a statement describing such changes and the reasons
therefore;
b. Annually, Form CR-F
or CR-S, as applicable;
c.
Annually, the report of the independent auditor on the financial statements of
the insurance enterprise, on the basis described in Subsection (d)
below;
d. Annually, the most recent
audited financial statements, regulatory filings, and actuarial opinion (as
filed with the certified reinsurer's supervisor, with a translation into
English). Upon the initial certification, audited financial statements for the
last two (2) years filed with the certified reinsurer's supervisor;
e. At least annually, an updated list of all
disputed and overdue reinsurance claims regarding reinsurance assumed from U.S.
domestic ceding insurers;
f. A
certification from the certified reinsurer's domestic regulator that the
certified reinsurer is in good standing and maintains capital in excess of the
jurisdiction's highest regulatory action level; and
g. Any other information that the director or
his designee may reasonably require.
8. Change in Rating or Revocation of
Certification
a. In the case of a downgrade by
a rating agency or other disqualifying circumstances, the director or his
designee shall upon written notice assign a new rating to the certified
reinsurer in accordance with the requirements of Subparagraph (4)(a).
b. The director or his designee shall have
the authority to suspend, revoke, or otherwise modify a certified reinsurer's
certification at any time if the certified reinsurer fails to meet its
obligations or security requirements under this section, or if other financial
or operating results of the certified reinsurer, or documented significant
delays in payment by the certified reinsurer, lead the director or his designee
to reconsider the certified reinsurer's ability or willingness to meet its
contractual obligations.
c. If the
rating of a certified reinsurer is upgraded by the director or his designee,
the certified reinsurer may meet the security requirements applicable to its
new rating on a prospective basis, but the director or his designee shall
require the certified reinsurer to post security under the previously
applicable security requirements as to all contracts in force on or before the
effective date of the upgraded rating. If the rating of a certified reinsurer
is downgraded by the director or his designee, the director or his designee
shall require the certified reinsurer to meet the security requirements
applicable to its new rating for all business it has assumed as a certified
reinsurer.
d. Upon revocation of
the certification of a certified reinsurer by the director or his designee, the
assuming insurer shall be required to post security in accordance with Section
X in order for the ceding insurer to continue to take credit for reinsurance
ceded to the assuming insurer. If funds continue to be held in trust in
accordance with Section 7, the director or his designee may allow additional
credit equal to the ceding insurer's pro rata share of such funds, discounted
to reflect the risk of uncollectibility and anticipated expenses of trust
administration. Notwithstanding the change of a certified reinsurer's rating or
revocation of its certification, a domestic insurer that has ceded reinsurance
to that certified reinsurer may not be denied credit for reinsurance for a
period of three (3) months for all reinsurance ceded to that certified
reinsurer, unless the reinsurance is found by the director or his designee to
be at high risk of uncollectibility.
C. Qualified Jurisdictions.
1. If, upon conducting an evaluation under
this section with respect to the reinsurance supervisory system of any non-U.S.
assuming insurer, the director or his designee determines that the jurisdiction
qualifies to be recognized as a qualified jurisdiction, the director or his
designee shall publish notice and evidence of such recognition in an
appropriate manner. The director or his designee may establish a procedure to
withdraw recognition of those jurisdictions that are no longer
qualified.
2. In order to determine
whether the domiciliary jurisdiction of a non-U.S. assuming insurer is eligible
to be recognized as a qualified jurisdiction, the director or his designee
shall evaluate the reinsurance supervisory system of the non-U.S. jurisdiction,
both initially and on an ongoing basis, and consider the rights, benefits and
the extent of reciprocal recognition afforded by the non-U.S. jurisdiction to
reinsurers licensed and domiciled in the U.S. The director or his designee
shall determine the appropriate approach for evaluating the qualifications of
such jurisdiction, and create and publish a list of jurisdictions whose
reinsurers may be approved by the director or his designee as eligible for
certification. A qualified jurisdiction must agree to share information and
cooperate with the director or his designee with respect to all certified
reinsurers domiciled within that jurisdiction. Additional factors to be
considered in determining whether to recognize a qualified jurisdiction, in the
discretion of the director or his designee, include but are not limited to the
following:
a. The framework under which the
assuming insurer is regulated.
b.
The structure and authority of the domiciliary regulator with regard to
solvency regulation requirements and financial surveillance.
c. The substance of financial and operating
standards for assuming insurers in the domiciliary jurisdiction
d. The form and substance of financial
reports required to be filed or made publicly available by reinsurers in the
domiciliary jurisdiction and the accounting principles used.
e. The domiciliary regulator's willingness to
cooperate with U.S. regulators in general and the director in
particular.
f. The history of
performance by assuming insurers in the domiciliary jurisdiction.
g. Any documented evidence of substantial
problems with the enforcement of final U.S. judgments in the domiciliary
jurisdiction. A jurisdiction will not be considered to be a qualified
jurisdiction if the director has determined that it does not adequately and
promptly enforce final U.S. judgments or arbitration awards.
h. Any relevant international standards or
guidance with respect to mutual recognition of reinsurance supervision adopted
by the International Association of Insurance Supervisors or successor
organization.
i. Any other matters
deemed relevant by the director or his designee.
3. A list of qualified jurisdictions shall be
published through the NAIC Committee Process. The director or his designee
shall consider this list in determining qualified jurisdiction. If the director
or his designee approves a jurisdiction as qualified that does not appear on
the list of qualified jurisdictions, the director or his designee shall provide
thoroughly documented justification with respect to the criteria provided under
Subsection VIII.C(2)(a) to (i).
4.
U.S. jurisdictions that meet the requirements for accreditation under the NAIC
financial standards and accreditation program shall be recognized as qualified
jurisdictions.
D.
Recognition of Certification Issued by an NAIC Accredited Jurisdiction
1. If an applicant for certification has been
certified as a reinsurer in an NAIC accredited jurisdiction, the director has
the discretion to defer to that jurisdiction's certification, and to defer to
the rating assigned by that jurisdiction, if the assuming insurer submits a
properly executed Form CR-1 and such additional information as the director
requires. The assuming insurer shall be considered to be a certified reinsurer
in this state.
2. Any change in the
certified reinsurer's status or rating in the other jurisdiction shall apply
automatically in this state as of the date it takes effect in the other
jurisdiction. The certified reinsurer shall notify the director of any change
in its status or rating within 10 days after receiving notice of the
change.
3. The director or his
designee may withdraw recognition of the other jurisdiction's rating at any
time and assign a new rating in accordance with Subsection B(8) of this
section.
4. The director or his
designee may withdraw recognition of the other jurisdiction's certification at
any time, with written notice to the certified reinsurer. Unless the director
or his designee suspends or revokes the certified reinsurer's certification in
accordance with Subsection B(8) of this section, the certified reinsurer's
certification shall remain in good standing in this state for a period of three
(3) months, which shall be extended if additional time is necessary to consider
the assuming insurer's application for certification in this state.
E. Mandatory Funding clause. In
addition to the clauses required under Section XIV reinsurance contracts
entered into or renewed under this section shall include a proper funding
clause, which requires the certified reinsurer to provide and maintain security
in an amount sufficient to avoid the imposition of any financial statement
penalty on the ceding insurer under this section for reinsurance ceded to the
certified reinsurer.
F. The
director shall comply with all reporting and notification requirements that may
be established by the NAIC with respect to certified reinsurers and qualified
jurisdictions.
Section
IX. Credit for Reinsurance - Reciprocal Jurisdictions.
A. Pursuant to Section
38-9-200(G),
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 regulation.
B.
A "Reciprocal Jurisdiction" is a jurisdiction, as designated by the director
pursuant to Subsection D, that meets one of the following:
1. 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 subsection, 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;
2. A U.S.
jurisdiction that meets the requirements for accreditation under the NAIC
financial standards and accreditation program; or
3. A qualified jurisdiction, as determined by
the director pursuant to Section
38-9-200(F)(4)
of the South Carolina Code of Laws and Section VIII.C of this Regulation, which
is not otherwise described in Paragraph (1) or (2) 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.
C.
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.
1. The assuming insurer must be
licensed to transact reinsurance by, and have its head office or be domiciled
in, a Reciprocal Jurisdiction.
2.
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 Subsection C(7)
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:
(1) Minimum capital and surplus equivalents
(net of liabilities) or own funds of the equivalent of at least $250,000,000;
and
(2) A central fund containing a
balance of the equivalent of at least $250,000,000.
3. The assuming insurer must have
and maintain on an ongoing basis a minimum solvency or capital ratio, as
applicable, as follows:
If the assuming insurer has its head office or is domiciled in a
Reciprocal Jurisdiction as defined in Section IX.B(1), the ratio specified in
the applicable covered agreement;
a.
If the assuming insurer is domiciled in a Reciprocal Jurisdiction as defined in
Section IX.B(2), 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
b. If the assuming insurer is domiciled in a
Reciprocal Jurisdiction as defined in Section IX.B(3), 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.
4. The assuming insurer must agree
to and provide adequate assurance, in the form of a properly executed Form RJ-1
(attached as an exhibit to this regulation), 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 Paragraphs (2) or (3) of this subsection, 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.
(1) The director may also require that such
consent be provided and included in each reinsurance agreement under the
director's jurisdiction.
(2)
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 Section
38-9-200(F)
and Section
38-9-210
of the South Carolina Code of Laws and Section XI, XII, or XIII of this
Regulation. For purposes of this Regulation, 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 Paragraph (5) of this subsection.
5. 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 Paragraph (6) of this subsection.
6. 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.
7. 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 Paragraphs (2) and (3) of
this subsection.
8. Nothing in this
provision precludes an assuming insurer from providing the director with
information on a voluntary basis.
D. The director shall timely create and
publish a list of Reciprocal Jurisdictions.
1.
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 IX.B(1) and (2), 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.
2. 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 IX.B(1) and (2). 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 Sections
38-9-200,
38-9-210,
and
38-9-220.
E. The director shall timely
create and publish a list of assuming insurers that have satisfied the
conditions set forth in this section and to which cessions shall be granted
credit in accordance with this section.
1. If
an NAIC accredited jurisdiction has determined that the conditions set forth in
Subsection C 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 subsection. The director may accept financial documentation filed with
another NAIC accredited jurisdiction or with the NAIC in satisfaction of the
requirements of Subsection C.
2.
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.
F. If the director determines that an
assuming insurer no longer meets one or more of the requirements under this
section, the director may revoke or suspend the eligibility of the assuming
insurer for recognition under this section.
1.
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 Section X.
2. 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 Section X.
G. Before denying statement credit or
imposing a requirement to post security with respect to Section IX.F of this
regulation or adopting any similar requirement that will have substantially the
same regulatory impact as security, the director shall:
1. 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 Subsection
C of this section;
2. 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;
3. After the expiration of 90 days or less,
as set out in Paragraph (2), 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 Subsection; and
4. Provide a written explanation to the
assuming insurer of any of the requirements set out in this
Subsection.
H. 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.
Section
X. Asset or Reduction from liability for reinsurance ceded to an
unauthorized assuming insurer not meeting the requirements of Sections III
through IX.
A. Pursuant to Section
38-9-210,
the director or his designee shall allow a reduction from liability for
reinsurance ceded by a domestic insurer to an assuming insurer not meeting the
requirements of Section
38-9-200
in an amount not exceeding the liabilities carried by the ceding insurer. The
reduction shall be in the amount of funds held by or on behalf of the ceding
insurer, including funds held in trust for the exclusive benefit of the ceding
insurer, under a reinsurance contract with such assuming insurer as security
for the payment of obligations under the reinsurance contract. The security
shall be held in the United States subject to withdrawal solely by, and under
the exclusive control of, the ceding insurer or, in the case of a trust, held
in a qualified United States financial institution as defined in Section
38-9-220.
This security may be in the form of any of the following:
2. Securities listed by the Securities
Valuation Office of the National Association of Insurance Commissioners,
including those deemed exempt from filing as defined by the Purposes and
Procedures Manual of the Securities Valuation Office, and qualifying as
admitted assets;
3. Clean,
irrevocable, unconditional and "evergreen" letters of credit issued or
confirmed by a qualified United States institution, as defined in Section
38-9-220,
effective no later than December 31 of the year for which filing is being made,
and in the possession of, or in trust for, the ceding company on or before the
filing date of its annual statement. Letters of credit meeting applicable
standards of issuer acceptability as of the dates of their issuance (or
confirmation) shall, notwithstanding the issuing (or confirming) institution's
subsequent failure to meet applicable standards of issuer acceptability,
continue to be acceptable as security until their expiration, extension,
renewal, modification or amendment, whichever first occurs: or
4. Any other form of security acceptable to
the director his designee.
B. An admitted asset or a reduction from
liability for reinsurance ceded to an unauthorized assuming insurer pursuant to
this Section shall be allowed only when the requirements of Sections XIV and
the applicable portions of Sections XI, XII or XIII of this regulation have
been satisfied.
Section
XI. Trust agreements qualified under Section X.
A. As used in this section:
1. "Beneficiary" means the entity for whose
sole benefit the trust has been established and any successor of the
beneficiary by operation of law. If a court of law appoints a successor in
interest to the named beneficiary, then the named beneficiary includes and is
limited to the court appointed domiciliary receiver (including conservator,
rehabilitator or liquidator).
2.
"Grantor" means the entity that has established a trust for the sole benefit of
the beneficiary. When established in conjunction with a reinsurance agreement,
the grantor is the unlicensed, unaccredited assuming insurer.
3. "Obligations," as used in Subsection B.11.
of this section, means:
a. Reinsured losses
and allocated loss expenses paid by the ceding company, but not recovered from
the assuming insurer;
b. Reserves
for reinsured losses reported and outstanding;
c. Reserves for reinsured losses incurred but
not reported: and
d. Reserves for
allocated reinsured loss expenses and unearned premiums.
B. Required Conditions.
1. The trust agreement shall be entered into
between the beneficiary, the grantor and a trustee which shall be a qualified
United States financial institution as defined in Section
38-9-220.
2. The trust agreement shall create a trust
account into which assets shall be deposited.
3. All assets in the trust account shall be
held by the trustee at the trustee's office in the United States.
4. The trust agreement shall provide that:
a. The beneficiary shall have the right to
withdraw assets from the trust account at any time, without notice to the
grantor, subject only to written notice from the beneficiary to the
trustee;
b. No other statement or
document is required to be presented in order to withdraw assets, except that
the beneficiary may be required to acknowledge receipt of withdrawn
assets;
c. It is not subject to any
conditions or qualifications outside of the trust agreement: and
d. It shall not contain references to any
other agreements or documents except as provided for under Paragraph 11 and 12
of this subsection.
5.
The trust agreement shall be established for the sole benefit of the
beneficiary.
6. The trust agreement
shall require the trustee to:
a. Receive
assets and hold all assets in a safe place;
b. Determine that all assets are in such form
that the beneficiary, or the trustee upon direction by the beneficiary, may
whenever necessary negotiate any such assets, without consent or signature from
the grantor or any other person or entity;
c. Furnish to the grantor and the beneficiary
a statement of all assets in the trust account upon its inception and at
intervals no less frequent than the end of each calendar quarter;
d. Notify the grantor and the beneficiary
within ten (10) days, of any deposits to or withdrawals from the trust
account;
e. Upon written demand of
the beneficiary, immediately take any and all steps necessary to transfer
absolutely and unequivocally all right, title and interest in the assets held
in the trust account to the beneficiary and deliver physical custody of the
assets to the beneficiary: and
f.
Allow no substitutions or withdrawals of assets from the trust account, except
on written instructions from the beneficiary, except that the trustee may,
without the consent of but with notice to the beneficiary, upon call or
maturity of any trust asset, withdraw such asset upon condition that the
proceeds are paid into the trust account.
7. The trust agreement shall provide that at
least thirty (30) days, but not more than forty-five (45) days, prior to
termination of the trust account, written notification of termination shall be
delivered by the trustee to the beneficiary.
8. The trust agreement shall be made subject
to and governed by the laws of the state in which the trust is
domiciled.
9. The trust agreement
shall prohibit invasion of the trust corpus for the purpose of paying
compensation to, or reimbursing the expenses of, the trustee. In order for a
letter of credit to qualify as an asset of the trust, the trustee shall have
the right and the obligation pursuant to the deed of trust or some other
binding agreement (as duly approved by the director or his designee), to
immediately draw down the full amount of the letter of credit and hold the
proceeds in trust for the beneficiaries of the trust if the letter of credit
will otherwise expire without being renewed or replaced.
10. The trust agreement shall provide that
the trustee shall be liable for its own negligence, willful misconduct or lack
of good faith. The failure of the trustee to draw against the letter of credit
in circumstances where such draw would be required shall be deemed to be
negligence and/or willful misconduct.
11. Notwithstanding other provisions of this
regulation, when a trust agreement is established in conjunction with a
reinsurance agreement covering risks other than life, annuities and accident
and health, where it is customary practice to provide a trust agreement for a
specific purpose, the trust agreement may provide that the ceding insurer shall
undertake to use and apply amounts drawn upon the trust account, without
diminution because of the insolvency of the ceding insurer or the assuming
insurer, only for the following purposes:
a.
To pay or reimburse the ceding insurer for the assuming insurer's share under
the specific reinsurance agreement regarding any losses and allocated loss
expenses paid by the ceding insurer, but not recovered from the assuming
insurer, or for unearned premiums due to the ceding insurer if not otherwise
paid by the assuming insurer;
b. To
make payment to the assuming insurer of any amounts held in the trust account
that exceed one hundred two percent (102%) of the actual amount required to
fund the assuming insurer's obligations under the specific reinsurance
agreement: or
c. Where the ceding
insurer has received notification of termination of the trust account and where
the assuming insurer's entire obligations under the specific reinsurance
agreement remain unliquidated and undischarged ten (10) days prior to the
termination date, to withdraw amounts equal to the obligations and deposit
those amounts in a separate account, in the name of the ceding insurer in any
qualified United States financial institution as defined in Section
38-9-220
apart from its general assets, in trust for such uses and purposes specified in
Subparagraphs a. and b. above as may remain executory after such withdrawal and
for any period after the termination date.
12. Notwithstanding other provisions of this
regulation, when a trust agreement is established to meet the requirements of
Section X in conjunction with a reinsurance agreement covering life, annuities
or accident and health risks, where it is customary to provide a trust
agreement for a specific purpose, the trust agreement may provide that the
ceding insurer shall undertake to use and apply amounts drawn upon the trust
account, without diminution because of the insolvency of the ceding insurer or
the assuming insurer, only for the following purposes:
a. To pay or reimburse the ceding insurer
for:
(1) The assuming insurer's share under
the specific reinsurance agreement of premiums returned, but not yet recovered
from the assuming insurer, to the owners of policies reinsured under the
reinsurance agreement on account of cancellations of the policies:
and
(2) The assuming insurer's
share under the specific reinsurance agreement of surrenders and benefits or
losses paid by the ceding insurer, but not yet recovered from the assuming
insurer, under the terms and provisions of the policies reinsured under the
reinsurance agreement;
b. To pay to the assuming insurer amounts
held in the trust account in excess of the amount necessary to secure the
credit or reduction from liability for reinsurance taken by the ceding insurer:
or
c. Where the ceding insurer has
received notification of termination of the trust and where the assuming
insurer's entire obligations under the specific reinsurance agreement remain
unliquidated and undischarged ten (10) days prior to the termination date, to
withdraw amounts equal to the assuming insurer's share of liabilities, to the
extent that the liabilities have not yet been funded by the assuming insurer,
and deposit those amounts in a separate account, in the name of the ceding
insurer in any qualified U. S. financial institution apart from its general
assets, in trust for the uses and purposes specified in Subparagraphs a and b
of this paragraph as may remain executory after withdrawal and for any period
after the termination date.
13. The reinsurance agreement may, but need
not, contain the provisions required by Subsection D.1.b. of this section, so
long as these required conditions are included in the trust agreement. Either
the reinsurance agreement or the trust agreement must stipulate that assets
deposited in the trust account shall be valued according to their current fair
market value and shall consist only of cash in United States dollars,
certificates of deposit issued by a United States bank and payable in United
States dollars, and investments permitted by the Insurance code or any
combination of the above, provided investments in or issued by an entity
controlling, controlled by or under common control with either the grantor or
the beneficiary of the trust shall not exceed five percent (5%) of the total to
be deposited. If the reinsurance agreement covers life, annuities or accident
and health risks, then the provisions required by this paragraph must be
included in the reinsurance agreement.
14. Notwithstanding any other provisions in
the trust instrument, if the grantor of the trust has been declared insolvent
or placed into receivership, rehabilitation, liquidation or similar proceedings
under the laws of its state or country of domicile, the trustee shall comply
with an order of the commissioner with regulatory oversight over the trust or
court of competent jurisdiction directing the trustee to transfer to the
commissioner with regulatory oversight or other designated receiver all of the
assets of the trust fund. The assets shall be applied in accordance with the
priority statutes and laws of the state in which the trust is domiciled
applicable to the assets of insurance companies in liquidation. If the
commissioner with regulatory oversight determines that the assets of the trust
fund or any part thereof are not necessary to satisfy claims of the U. S.
beneficiaries of the trust, the assets or any part of them shall be returned to
the trustee for distribution in accordance with the trust agreement.
C. Permitted Conditions.
1. The trust agreement may provide that the
trustee may resign upon delivery of a written notice of resignation, effective
not less than ninety (90) days after the beneficiary and grantor receive the
notice and that the trustee may be removed by the grantor by delivery to the
trustee and the beneficiary of a written notice of removal, effective not less
than ninety (90) days after the trustee and the beneficiary receive the notice,
provided that no such resignation or removal shall be effective until a
successor trustee has been duly appointed and approved by the beneficiary and
the grantor and all assets in the trust have been duly transferred to the new
trustee.
2. The grantor may have
the full and unqualified right to vote any shares of stock in the trust account
and to receive from time to time payments of any dividends or interest upon any
shares of stock or obligations included in the trust account. Any such interest
or dividends shall be either forwarded promptly upon receipt to the grantor or
deposited in a separate account established in the grantor's name.
3. The trustee may be given authority to
invest, and accept substitutions of, any funds in the account, provided that no
investment or substitution shall be made without prior approval of the
beneficiary, unless the trust agreement specifies categories of investments
acceptable to the beneficiary and authorizes the trustee to invest funds and to
accept substitutions which the trustee determines are at least equal in current
fair market value to the assets withdrawn and that are consistent with the
restrictions in Subsection D.1.b. of this section.
4. The trust agreement may provide that the
beneficiary may at any time designate a party to which all or part of the trust
assets are to be transferred. Such transfer may be conditioned upon the trustee
receiving, prior to or simultaneously, other specified assets.
5. The trust agreement may provide that, upon
termination of the trust account, all assets not previously withdrawn by the
beneficiary shall, with written approval by the beneficiary, be delivered over
to the grantor.
D.
Additional Conditions Applicable To Reinsurance Agreements.
1. A reinsurance agreement may contain
provisions that:
a. Require the assuming
insurer to enter into a trust agreement and to establish a trust account for
the benefit of the ceding insurer, and specifying what the agreement is to
cover;
b. Require the assuming
insurer, prior to depositing assets with the trustee, to execute assignments or
endorsements in blank, or to transfer legal title to the trustee of all shares,
obligations or any other assets requiring assignments, in order that the ceding
insurer, or the trustee upon the direction of the ceding insurer, may whenever
necessary negotiate these assets without consent or signature from the assuming
insurer or any other entity;
c.
Require that all settlements of account between the ceding insurer and the
assuming insurer be made in cash or its equivalent: and
d. Stipulate that the assuming insurer and
the ceding insurer agree that the assets in the trust account, established
pursuant to the provisions of the reinsurance agreement, may be withdrawn by
the ceding insurer at any time, notwithstanding any other provisions in the
reinsurance agreement, and shall be utilized and applied by the ceding insurer
or its successors in interest by operation of law, including without limitation
any liquidator, rehabilitator, receiver or conservator of such company, without
diminution because of insolvency on the part of the ceding insurer or the
assuming insurer, only for the following purposes:
(1) To pay or reimburse the ceding insurer
for:
(i) The assuming insurer's share under
the specific reinsurance agreement of premiums returned, but not yet recovered
from the assuming insurer, to the owners of policies reinsured under the
reinsurance agreement because of cancellations of such policies;
(ii) The assuming insurer's share of
surrenders and benefits or losses paid by the ceding insurer pursuant to the
provisions of the policies reinsured under the reinsurance agreement:
and
(iii) Any other amounts
necessary to secure the credit or reduction from liability for reinsurance
taken by the ceding insurer.
(2) To make payment to the assuming insurer
of amounts held in the trust account in excess of the amount necessary to
secure the credit or reduction from liability for reinsurance taken by the
ceding insurer.
2. The reinsurance agreement may also contain
provisions that:
a. Give the assuming insurer
the right to seek approval from the ceding insurer, which shall not be
unreasonably or arbitrarily withheld, to withdraw from the trust account all or
any part of the trust assets and transfer those assets to the assuming insurer,
provided:
(1) The assuming insurer shall, at
the time of withdrawal, replace the withdrawn assets with other qualified
assets having a market value equal to the current fair market value of the
assets withdrawn so as to maintain at all times the deposit in the required
amount, or
(2) After withdrawal and
transfer, the current fair market value of the trust account is no less than
one hundred two percent (102%) of the required amount.
b. Provide for the return of any amount
withdrawn in excess of the actual amounts required for Subsections D.1.e of
this section, and for interest payments, at a rate not in excess of the prime
rate of interest, on the amounts held pursuant to Subsection D.1.e.
c. Permit the award by any arbitration panel
or court of competent jurisdiction of:
(1)
Interest at a rate different from that provided in Subparagraph b,
(2) Court or arbitration costs,
(4) Any other reasonable expenses.
3. Financial reporting.
A trust agreement may be used to reduce any liability for reinsurance ceded to
an unauthorized assuming insurer in financial statements required to be filed
with this Department in compliance with the provisions of this regulation when
established on or before the date of filing of the financial statement of the
ceding insurer. Further, the reduction for the existence of an acceptable trust
account may be up to the current fair market value of acceptable assets
available to be withdrawn from the trust account at that time, but such
reduction shall be no greater than the specific obligations under the
reinsurance agreement that the trust account was established to
secure.
4. Existing agreements.
Notwithstanding the effective date of this regulation, any trust agreement or
underlying reinsurance agreement in existence prior to December 31, 1992, will
continue to be acceptable until December 31, 1993, at which time the agreements
will have to fully comply with this regulation for the trust agreement to be
acceptable.
5. The failure of any
trust agreement to specifically identify the beneficiary as defined in
Subsection A of this section shall not be construed to affect any actions or
rights which the director or his designee may take or possess pursuant to the
provisions of the laws of this State.
Section XII. Letters of credit qualified
under Section X.
A. The letter of credit must
be clean, irrevocable unconditional and issued or confirmed by a qualified
United States financial institution as defined in Section
38-9-220.
The letter of credit shall contain an issue date and expiration date and shall
stipulate that the beneficiary need only draw a sight draft under the letter of
credit and present it to obtain funds and that no other document need be
presented. The letter of credit shall also indicate that it is not subject to
any condition or qualifications outside of the letter of credit. In addition,
the letter of credit itself shall not contain reference to any other
agreements, documents or entities, except as provided in Subsection H.1 below.
As used in this section, "beneficiary" means the domestic insurer for whose
benefit the letter of credit has been established and any successor of the
beneficiary by operation of law. If a court of law appoints a successor in
interest to the named beneficiary, then the named beneficiary includes and is
limited to the court appointed domiciliary receiver (including conservator,
rehabilitator or liquidator).
B.
The heading of the letter of credit may include a boxed section containing the
name of the applicant and other appropriate notations to provide a reference
for the letter of credit. The boxed section shall be clearly marked to indicate
that such information is for internal identification purposes only.
C. The letter of credit shall contain a
statement to the effect that the obligation of the qualified United States
financial institution under the letter of credit is in no way contingent upon
reimbursement with respect thereto.
D. The term of the letter of credit shall be
for at least one year and shall contain an "evergreen clause" which prevents
the expiration of the letter of credit without due notice from the issuer. The
"evergreen clause" shall provide for a period of no less than thirty (30) days'
notice prior to expiration date or nonrenewal.
E. The letter of credit shall state whether
it is subject to and governed by the laws of this State or the Uniform Customs
and Practice for Documentary Credits of the International Chamber of Commerce
(Publication 600), or any successor publication, and all drafts drawn
thereunder shall be presentable at an office in the United States of a
qualified United States financial institution.
F. If the letter of credit is made subject to
the Uniform Customs and Practice for Documentary Credits of the International
Chamber of Commerce Publication 600 (UCP 600) or International Standby
Practices of the International Chamber of Commerce Publication 590 (ISP98), or
any successor publication, then the letter of credit shall specifically address
and provide for an extension of time to draw against the letter of credit in
the event that one or more of the occurrences specified in Article 36 of
Publication 600 or any other successor publication, occur.
G. If the letter of credit is issued by a
qualified United States financial institution authorized to issue letters of
credit, other than a qualified United States financial institution as described
in Subsection A. of this section, then the following additional requirements
shall be met:
1. The issuing qualified United
States financial institution shall formally designate the confirming qualified
United States financial institution as its agent for the receipt and payment of
the drafts, and
2. The "evergreen
clause" shall provide for thirty (30) days' notice prior to expiry date for
nonrenewal.
H.
Reinsurance Agreement Provisions.
1. The
reinsurance agreement in conjunction with which the letter of credit is
obtained may contain provisions which:
a.
Require the assuming insurer to provide letters of credit to the ceding insurer
and specify what they are to cover.
b. Stipulate that the assuming insurer and
ceding insurer agree that the letter of credit provided by the assuming insurer
pursuant to the provisions of the reinsurance agreement may be drawn upon at
any time, notwithstanding any other provisions in the agreement, and shall be
utilized by the ceding insurer or its successors in interest only for one or
more of the following reasons:
(1) To pay or
reimburse the ceding insurer for:
(i) The
assuming insurer's share under the specific reinsurance agreement of premiums
returned, but not yet recovered from the assuming insurers, to the owners of
policies reinsured under the reinsurance agreement on account of cancellations
of such policies: and
(ii) The
assuming insurer's share, under the specific reinsurance agreement, of
surrenders and benefits or losses paid by the ceding insurer, but not yet
recovered from the assuming insurers, under the terms and provisions of the
policies reinsured under the reinsurance agreement;
(iii) Any other amounts necessary to secure
the credit or reduction from liability for reinsurance taken by the ceding
insurer.
(2) Where the
letter of credit will expire without renewal or be reduced or replaced by a
letter of credit for a reduced amount and where the assuming insurer's entire
obligations under the specific reinsurance remain unliquidated and undischarged
ten (10) days prior to the termination date, to withdraw amounts equal to the
assuming insurer's share of the liabilities, to the extent that the liabilities
have not yet been funded by the assuming insurer and exceed the amount of any
reduced or replacement letter of credit, and deposit those amounts in a
separate account in the name of the ceding insurer in a qualified U. S.
financial institution apart from its general assets, in trust for such uses and
purposes specified in Subsection H.1.b.(1) of this section as may remain after
withdrawal and for any period after the termination date.
c. All of the provisions of Paragraph 1 of
this subsection shall be applied without diminution because of insolvency on
the part of the ceding insurer or assuming insurer.
2. Nothing contained in Paragraph 1 of this
subsection shall preclude the ceding insurer and assuming insurer from
providing for:
a. An interest payment, at a
rate not in excess of the prime rate of interest, on the amounts held pursuant
to Paragraph 1.b. of this subsection: and/or
b. The return of any amounts drawn down on
the letters of credit in excess of the actual amounts required for the above or
any amounts that are subsequently determined not to be due.
Section
XIII. Other security.
A ceding insurer may take credit for unencumbered funds withheld
by the ceding insurer in the United States subject to withdrawal solely by the
ceding insurer and under its exclusive control.
Section XIV. Reinsurance contract.
Credit will not be granted, nor an asset or reduction from
liability allowed, to a ceding insurer for reinsurance effected with assuming
insurers meeting the requirements of Sections III, IV, V, VI, VIII, IX or X of
this regulation or otherwise in compliance with Section
38-9-200
after the adoption of this regulation unless the reinsurance agreement:
A. Includes a proper insolvency clause, which
stipulates that reinsurance is payable directly to the liquidator or successor
without diminution regardless of the status of the ceding company, pursuant to
Section
38-27-510;
B. Includes a provision pursuant to Section
38-9-200(G)
whereby the assuming insurer, if an unauthorized assuming insurer, has
submitted to the jurisdiction of an alternative dispute resolution panel or
court of competent jurisdiction within the United States, has agreed to comply
with all requirements necessary to give such court or panel jurisdiction, has
designated an agent upon whom service of process may be effected, and has
agreed to abide by the final decision of such court or panel; and
C. Includes a proper reinsurance intermediary
clause, if applicable, which stipulates that the credit risk for the
intermediary is carried by the assuming insurer.
Section XV. Contracts affected.
All new and renewal reinsurance transactions entered into after
December 31, 1993, shall conform to the requirements of Sections
38-9-190
through
38-9-220
and this regulation if credit is to be given to the ceding insurer for such
reinsurance.
Form AR-1 Certificate of assuming insurer |
FORM AR-1 |
CERTIFICATE OF ASSUMING INSURER |
I, __________(Name of Officer), __________ (Title of
Officer) of __________ (Name of Assuming Insurer), the assuming insurer under a
reinsurance contract with one or more insurers domiciled in South Carolina
hereby certify that __________ (Name of Assuming Insurer) ("Assuming
Insurer"): |
1. Submits to the
jurisdiction of any court of competent jurisdiction in South Carolina for the
adjudication of any issues arising out of the reinsurance agreement(s), agrees
to comply with all requirements necessary to give such court jurisdiction, and
will abide by the final decision of such court or any appellate court in the
event of an appeal. Nothing in this paragraph constitutes or should be
understood to constitute a waiver of Assuming Insurer's rights to commence an
action in any court of competent jurisdiction in the United States, to remove
an action to a United States District Court, or to seek a transfer of a case to
another court as permitted by the laws of the United States or of any state in
the United States. This paragraph is not intended to conflict with or override
the obligation of the parties to the reinsurance agreement(s) to arbitrate
their disputes if such an obligation is created in the agreement(s).
2. Designates the director or his designee of
South Carolina as its lawful attorney upon whom may be served any lawful
process in any action, suit or proceeding arising out of the reinsurance
agreement(s) instituted by or on behalf of the ceding insurer.
3. Submits to the authority of the director
or his designee of South Carolina to examine its books and records and agrees
to bear the expense of any such examination.
4. Submits with this form a current list of
insurers domiciled in South Carolina reinsured by Assuming Insurer and
undertakes to submit additions to or deletions from the list to the director or
his designee at least once per calendar quarter.
Dated: |
(Name of Assuming Insurer) |
BY: |
(Name of Officer) |
(Title of Officer) |
Form CR-1 Certificate of Certified Reinsurer
FORM CR-1
CERTIFICATE OF CERTIFIED REINSURER
I, _________________________(Name of Officer),
_____________________________(Title of Officer)
of _________________________ (Name of Assuming Insurer), the
assuming insurer under a reinsurance agreement with one or more insurers
domiciled in South Carolina, in order to be considered for approval in this
state, hereby certify that _________________ (Name of Assuming Insurer)
("Assuming Insurer"):
1.
Submits to the jurisdiction of any court of competent jurisdiction in South
Carolina for the adjudication of any issues arising out of the reinsurance
agreement, agrees to comply with all requirements necessary to give such court
jurisdiction, and will abide by the final decision of such court or any
appellate court in the event of an appeal. Nothing in this paragraph
constitutes or should be understood to constitute a waiver of Assuming
Insurer's rights to commence an action in any court of competent jurisdiction
in the United States, to remove an action to a United States District court, or
to seek a transfer of a case to another court as permitted by the laws of the
United States or of any state in the United States. This paragraph is not
intended to conflict with or override the obligation of the parties to the
reinsurance agreement to arbitrate their disputes if such an obligation is
created in the agreement.
2.
Designates the director of the South Carolina Department of Insurance as its
lawful attorney upon whom may be served any lawful process in any action, suit
or proceeding arising out of the reinsurance agreement instituted by or on
behalf of the ceding insurer.
3.
Agrees to provide security in an amount equal to 100% of liabilities
attributable to U.S. ceding insurers if it resists enforcement of a final U.S.
judgment or properly enforceable arbitration award.
4. Agrees to provide notification within 10
days of any regulatory actions taken against it, any change in the provisions
of its domiciliary license or any change in its rating by an approved rating
agency, including a statement describing such changes and the reasons
therefore.
5. Agrees to annually
file information comparable to relevant provisions of the NAIC financial
statement for use by insurance markets in accordance with S.C. Reg.
69-53.
6. Agrees to annually file
the report of the independent auditor on the financial statements of the
insurance enterprise.
7. Agrees to
annually file audited financial statement, regulatory filings, and actuarial
opinion in accordance with S.C. Reg. 69-53.
8. Agrees to annually file an updated list of
all disputed and overdue reinsurance claims regarding reinsurance assumed from
U.S. domestic ceding insurers.
9.
Is in good standing as an insurer or reinsurer with the supervisor of its
domiciliary jurisdiction.
Dated: |
(Name of Assuming Insurer) |
FORM RJ-1
CERTIFICATE OF REINSURER DOMICILED IN RECIPROCAL
JURISDICTION
I,___________________________________________________________________________________
(Name of Officer) (Title of Officer)
of
_____________________________________________________________________
(Name of Assuming Insurer)
the assuming insurer under a reinsurance agreement with one or
more insurers domiciled in _____________________________________, in order
to
(Name of State)
be considered for approval in this state, hereby certify that
________________________________________ ("Assuming Insurer"): (Name of
Assuming Insurer)
Submits to the jurisdiction of any court of competent
jurisdiction in South Carolina for the adjudication of any issues arising out
of the reinsurance agreement, agrees to comply with all requirements necessary
to give such court jurisdiction, and will abide by the final decision of such
court or any appellate court in the event of an appeal. The assuming insurer
agrees that it will include such consent in each reinsurance agreement, if
requested by the director. Nothing in this paragraph constitutes or should be
understood to constitute a waiver of assuming insurer's rights to commence an
action in any court of competent jurisdiction in the United States, to remove
an action to a United States District Court, or to seek a transfer of a case to
another court as permitted by the laws of the United States or of any state in
the United States. This paragraph is not intended to conflict with or override
the obligation of the parties to the reinsurance agreement to arbitrate their
disputes if such an obligation is created in the agreement, except to the
extent such agreements are unenforceable under applicable insolvency or
delinquency laws.
Designates the South Carolina Director of Insurance as its lawful
attorney in and for this State upon whom may be served any lawful process in
any action, suit or proceeding in this state arising out of the reinsurance
agreement instituted by or on behalf of the ceding insurer.
Agrees 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.
Agrees to provide prompt written notice and explanation if it
falls below the minimum capital and surplus or capital or surplus ratio, or if
any regulatory action is taken against it for serious noncompliance with
applicable law.
Confirms that it is not presently participating in any solvent
scheme of arrangement, which involves insurers domiciled in this State. If the
assuming insurer enters into such an arrangement, the assuming insurer agrees
to notify the ceding insurer and the director, and to provide 100% security to
the ceding insurer consistent with the terms of the scheme.
Agrees that in each reinsurance agreement it will provide
security in an amount equal to 100% of the assuming insurer's liabilities
attributable to reinsurance ceded pursuant to that agreement if the assuming
insurer resists enforcement of a final U.S. judgment, that is enforceable under
the law of the territory in which it was obtained, or a properly enforceable
arbitration award whether obtained by the ceding insurer or by its resolution
estate, if applicable.
Agrees to provide the documentation in accordance with Section
IX.C(5) of Regulation 69-53, if requested by the director.
Dated: ___________________________
(Name of Assuming Insurer)
BY: ______________________________________________
(Name of Officer)
______________________________________________
(Title of Officer)
Statutory Authority: S.C. Code Sections
38-3-110;
38-9-200; 1-23-10 et seq.