(1) Credit is
allowed 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 meets the requirements of this
rule.
(2) Credit is allowed when
reinsurance is ceded from an insurer domiciled in this state to an assuming
insurer if the assuming insurer:
(a) is
licensed to transact reinsurance by, and has its head office or is domiciled
in, a reciprocal jurisdiction;
(b)
meets and maintains minimum capital and surplus, or its equivalent, calculated
on at least an annual basis as of the preceding December 31 or on the annual
date reported to the reciprocal jurisdiction; and
(c) the minimum capital and surplus is
confirmed under Subsection (2)(g) according to the methodology of its
domiciliary jurisdiction, in the following amounts:
(A) no less than $250 million; or
(B) if the assuming insurer is an
association, including incorporated and individual unincorporated underwriters:
(I) minimum capital and surplus equivalents,
net of liabilities, or own funds of the equivalent of at least $250 million;
and
(II) a central fund containing
a balance of the equivalent of at least $250 million;
(d) meets and maintains on an
ongoing basis a minimum solvency or capital ratio as follows:
(i) if the assuming insurer has its head
office or is domiciled in a reciprocal jurisdiction as defined in Subsection
R590-173-3(12)(a),
the ratio specified in the applicable covered agreement;
(ii) if the assuming insurer is domiciled in
a reciprocal jurisdiction as defined in Subsection
R590-173-3(12)(b),
a risk-based capital ratio of 300% of the authorized control level, calculated
according to the formula developed by the NAIC; or
(iii) if the assuming insurer is domiciled in
a reciprocal jurisdiction as defined in Subsection
R590-173-3(12)(c),
after consultation with the reciprocal jurisdiction and considering any
recommendations published through the NAIC committee process, such solvency or
capital ratio as the commissioner determines to be an effective measure of
solvency;
(e) provides
adequate assurance in a completed Form RJ-1, available on the department's
website,
https://insurance.utah.gov, that the
assuming insurer:
(i) will provide prompt
written notice and explanation to the commissioner if:
(A) it falls below the minimum requirements
set forth in Subsection (2)(b) or (2)(c); or
(B) any regulatory action is taken against it
for serious noncompliance with applicable law;
(ii) consents to the jurisdiction of the
courts of this state and appoints the commissioner as agent for service of
process;
(iii) consents in writing
to pay all final judgments, wherever enforcement is sought, obtained by a
ceding insurer that is enforceable where the judgment was obtained;
(iv) includes in every reinsurance agreement
a requirement that it will provide security in an amount equal to 100% of
liabilities attributable to reinsurance ceded pursuant to the agreement if it
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;
(v) confirms that it is not participating in
a solvent scheme of arrangement that involves this state's ceding
insurers;
(vi) on entering into a
solvent scheme of arrangement, agrees to:
(A)
notify the ceding insurer and the commissioner; and
(B) provide 100% security to the ceding
insurer consistent with the terms of the scheme, and in a form consistent with
the provisions of law and this rule; and
(vii) agrees in writing to meet the
applicable information filing requirements of Subsection (2)(f);
(f) provides, if requested by the
commissioner, on behalf of itself and any legal predecessors, the following
documentation:
(i) for the two years
preceding entry into the reinsurance agreement and on an annual basis
thereafter, its annual audited financial statements, in accordance with the
applicable law of the jurisdiction of its head office or domiciliary
jurisdiction, including the external audit report;
(ii) for the two years preceding entry into
the reinsurance agreement, its solvency and financial condition report or
actuarial opinion, if filed with its supervisor;
(iii) before entry into the reinsurance
agreement and not more than semi-annually thereafter, an updated list of all
disputed and overdue reinsurance assumed from ceding insurers domiciled in the
United States; and
(iv) before
entry into the reinsurance agreement and not more than semi-annually
thereafter, information regarding its:
(A)
assumed reinsurance by the ceding insurer;
(B) ceded reinsurance by the assuming
insurer; and
(C) reinsurance
recoverables on its paid and unpaid losses allowing for the evaluation of the
criteria set forth in Subsection (2)(g);
(g) maintains a practice of promptly paying
reinsurance claims as follows:
(i) no more
than 15% of its reinsurance recoverables are overdue and in dispute, as
reported to the commissioner;
(ii)
no more than 15% of its ceding insurers or reinsurers have overdue reinsurance
recoverables on paid losses of 90 days or more that are:
(A) not in dispute and exceed for each ceding
insurer $100,000; or
(B) as
specified in a covered agreement; or
(iii) the aggregate amount of reinsurance
recoverables on undisputed paid losses are:
(A) overdue by 90 days or more and exceed $50
million; or
(B) as specified in a
covered agreement; and
(h) complies with Subsections (2)(b) and
(2)(c) as confirmed by its supervisory authority to the commissioner on an
annual basis.
(3) An
assuming insurer may provide the commissioner with information on a voluntary
basis.
(4) An assuming insurer's
consent to the jurisdiction of the courts of this state and to appointing the
commissioner as agent for service of process shall be included in each
reinsurance agreement under the commissioner's jurisdiction.
(5) Parties to a reinsurance agreement may
agree to alternative dispute resolution mechanisms, except to the extent such
agreements are unenforceable under applicable insolvency or delinquency
laws.
(6)
(a) The commissioner shall create and publish
a list of reciprocal jurisdictions that includes a reciprocal jurisdiction as
defined under Subsection
R590-173-3(12)(a),
R590-173-3(12)(b),
or
R590-173-3(12)(c).
(b) The commissioner shall consider a
reciprocal jurisdiction included on the NAIC list of reciprocal
jurisdictions.
(7) The
commissioner 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.
(8)
(a) The commissioner may remove a
jurisdiction from the list of reciprocal jurisdictions on a determination that
the jurisdiction no longer meets one or more of the requirements of a
reciprocal jurisdiction, as provided by applicable law or in accordance with a
process published through the NAIC committee process.
(b) The commissioner may not remove from the
list a reciprocal jurisdiction defined under Subsection
R590-173-3(12)(a),
R590-173-3(12)(b),
or
R590-173-3(12)(c).
(c) When removing a reciprocal jurisdiction
from the commissioner's list, credit for reinsurance ceded to an assuming
insurer domiciled in that jurisdiction is permitted, if otherwise allowed by
law.
(9) The
commissioner shall create and publish a list of assuming insurers that qualify
as reinsurers from reciprocal jurisdictions satisfying the conditions of this
section and where cessions are granted reinsurance credit.
(a) If an NAIC accredited jurisdiction
determines that the conditions set forth in Subsection (9)(b) are met, the
commissioner may:
(i) defer to that
jurisdiction's determination;
(ii)
add the assuming insurer to the list of insurers where cessions are granted
reinsurance credit; and
(iii)
accept financial documentation filed with another NAIC accredited jurisdiction
or with the NAIC under Subsection (9)(b).
(b) A request to defer to another NAIC
accredited jurisdiction's determination shall include:
(i) a completed Form RJ-1, available on the
department's website,
https://insurance.utah.gov;
and
(ii) additional information the
commissioner may require.
(c) Upon receipt of a request under
Subsection (9)(b), the commissioner shall:
(i) notify other states of the request
through the NAIC committee process; and
(ii) provide relevant information about the
determination of eligibility.
(10) If the commissioner determines that an
assuming insurer no longer meets one or more of the requirements under this
section, the commissioner may revoke or suspend the eligibility of the assuming
insurer.
(a) During a suspension period, a
reinsurance agreement may not be 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 under Section
R590-173-11.
(b) Credit for reinsurance may not be
available after the effective date of the revocation for a reinsurance
agreement entered into before 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 commissioner and consistent with Section
R590-173-11.
(11) Before denying statement
credit, requiring security under Subsection (10), or adopting a similar
requirement with the same regulatory impact to requiring security, the
commissioner shall:
(a) notify the following
that the assuming insurer no longer satisfies one of the conditions listed in
Subsection (2):
(i) the ceding
insurer;
(ii) the assuming insurer;
and
(iii) the assuming insurer's
supervisory authority;
(b) give the assuming insurer:
(i) 30 days to submit a plan to remedy the
defect; and
(ii) 90 days to remedy
the defect unless a shorter period is necessary to protect policyholders and
consumers;
(c) take an
action described in Subsection (11) if the defect has not been remedied;
and
(d) provide the assuming
insurer a written explanation for action taken.
(12) A ceding insurer may seek a court order
that requires an assuming insurer in receivership, rehabilitation, or
liquidation to post security for the assuming insurer's outstanding
liabilities.