West Virginia Code of State Rules
Agency 114 - Insurance Commission
Title 114 - LEGISLATIVE RULE INSURANCE COMMISSIONER
Series 114-40 - Credit For Reinsurance
Section 114-40-6 - Certified Reinsurers
Universal Citation: 114 WV Code of State Rules 114-40-6
Current through Register Vol. XLI, No. 38, September 20, 2024
6.1. Pursuant to W. Va. Code § 33-4-15a(b)(2)(E), the commissioner 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 commissioner. The security shall be in a form consistent with the provisions of W. Va. Code §§ 33-4-15a(b)(2)(E) and 33-4-15a(c), and section 10, 11, or 12 of this rule. The amount of security required in order for full credit to be allowed shall correspond with the following requirements:
6.1.a.
|
Ratings |
Security Required |
|
Secure . 1 |
0% |
|
Secure - 2 |
10% |
|
Secure . 3 |
20% |
|
Secure - 4 |
50% |
|
Secure - 5 |
75% |
|
Vulnerable . 6 |
100% |
6.1.b.
Affiliated reinsurance transactions shall receive the same opportunity for reduced
security requirements as all other reinsurance transactions.
6.1.c. The commissioner shall require the
certified reinsurer to post, for the benefit of the ceding insurer or its estate,
one hundred percent (100%) security upon the entry of an order of rehabilitation,
liquidation or conservation against the ceding insurer.
6.1.d. 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 commissioner. 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 National Association of Insurance Commissioners annual
financial statement related specifically to the catastrophic occurrence will be
included in the deferral:
6.1.d.1. Line 1:
Fire;
6.1.d.2. Line 2: Allied
Lines;
6.1.d.3. Line 3: Farmowners
multiple peril;
6.1.d.4. Line 4:
Homeowners multiple peril;
6.1.d.5. Line
5: Commercial multiple peril;
6.1.d.6.
Line 9: Inland Marine;
6.1.d.7. Line 12:
Earthquake; and
6.1.d.8. Line 21: Auto
physical damage.
6.1.e. 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.
6.1.f. 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.
6.2. Certification Procedure.
6.2.a. The commissioner 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 commissioner may not take final action on the application until
at least thirty (30) days after posting the notice required by this
subdivision.
6.2.b. The commissioner
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 6.1 of this section.
The commissioner shall publish a list of all certified reinsurers and their
ratings.
6.2.c. In order to be eligible
for certification, the assuming insurer shall meet the following requirements:
6.2.c.1. The assuming insurer must be domiciled
and licensed to transact insurance or reinsurance in a qualified jurisdiction, as
determined by the commissioner pursuant to subsection 6.3 of this section.
6.2.c.2. The assuming insurer must maintain
capital and surplus, or its equivalent, of no less than $250,000,000, calculated in
accordance with paragraph 8, subdivision d 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 central fund containing a balance of at
least $250,000,000.
6.2.c.3. The
assuming insurer must maintain financial strength ratings from two or more rating
agencies deemed acceptable by the commissioner. 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 commissioner in determining the
rating that is assigned to the assuming insurer. Acceptable rating agencies include
the following:
6.2.c.3.A. Standard & Poor's;
6.2.c.3.B. Moody's Investors
Service;
6.2.c.3.C. Fitch Ratings;
6.2.c.3.D. A.M. Best Company; or
6.2.c.3.E. Any other nationally
recognized statistical rating organization.
6.2.c.4. The certified reinsurer must comply with
any other requirements reasonably imposed by the commissioner.
6.2.d. 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:
6.2.d.1. 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 commissioner 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- |
Aal, Aa2, Aa3 |
AA+, AA, AA- |
|
Secure - 3 |
A |
A+, A |
Al, A2 |
A. A |
|
Secure . 4 |
A- |
A- |
A3 |
A- |
|
Secure - 5 |
B++, B+ |
BBB+, BBB, BBB- |
Baal, 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 |
Bal, Ba2, Ba3,Bl, B2, B3, Caa, Ca, C |
BB+, BB, BB-, B+, B, B-, CCC+, CC, CCC-, DD |
6.2.d.2.
The business practices of the certified reinsurer in dealing with its ceding
insurers, including its record of compliance with reinsurance contractual terms and
obligations.
6.2.d.3. For certified
reinsurers domiciled in the United States, a review of the most recent applicable
National Association of Insurance Commissioners Annual Statement Blank, either
Schedule F (for property/casualty reinsurers) or Schedule S (for life and health
reinsurers);
6.2.d.4. For certified
reinsurers not domiciled in the United States, a review annually of Form CR-F (for
property/casualty reinsurers) or Form CR-S (for life and health reinsurers), as
adopted by the National Association of Insurance Commissioners;
6.2.d.5. 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;
6.2.d.6. Regulatory actions against the certified
reinsurer;
6.2.d.7. The report of the
independent auditor on the financial statements of the insurance enterprise, on the
basis described in paragraph 8 of this subdivision;
6.2.d.8. For certified reinsurers not domiciled in
the United States, 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 commissioner will
consider audited financial statements for the last two (2) years filed with its
non-United States jurisdiction supervisor;
6.2.d.9. The liquidation priority of obligations
to a ceding insurer in the certified reinsurer's domiciliary jurisdiction in the
context of an insolvency proceeding;
6.2.d.10. A certified reinsurer's participation in
any solvent scheme of arrangement, or similar procedure, which involves United
States ceding insurers. The commissioner shall receive prior notice from a certified
reinsurer that proposes participation by the certified reinsurer in a solvent scheme
of arrangement; and
6.2.d.11. Any other
information deemed relevant by the commissioner.
6.2.e. Based on the analysis conducted under
paragraph 5, subdivision d of this subsection of a certified reinsurer's reputation
for prompt payment of claims, the commissioner may make appropriate adjustments in
the security the certified reinsurer is required to post to protest its liabilities
to United States ceding insurers, provided that the commissioner shall, at a
minimum, increase the security the certified reinsurer is required to post by one
rating level under paragraph 1, subdivision d of this subsection if the commissioner
finds that:
6.2.e.1. 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
6.2.e.2. 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.
6.2.f. The assuming insurer must submit a properly
executed Form CR-1, as adopted by the National Association of Insurance
Commissioners, as evidence of its submission to the jurisdiction of this state,
appointment of the commissioner as an agent for 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 United States ceding
insurers if it resists enforcement of a final United States judgement. The
commissioner shall not certify any assuming insurer that is domiciled in a
jurisdiction that the commissioner has determined does not adequately and promptly
enforce final United States judgements or arbitration awards.
6.2.g. The certified reinsurer must agree to meet
applicable information filing requirements as determined by the commissioner, both
with respect to an initial application for certification and on an ongoing basis.
All information submitted by certified reinsurers which is not otherwise public
information subject to disclosure is exempted from disclosure under Chapter 29B of
the West Virginia Code and shall be withheld from public disclosure. The applicable
information filing requirements are as follows:
6.2.g.1. 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;
6.2.g.2. Annually, Form CR-F
or CR-S, as adopted by the National Association of Insurance Commissioners and as
applicable;
6.2.g.3. Annually, the
report of the independent auditor on the financial statements of the insurance
enterprise, on the basis described in paragraph 4 of this subdivision;
6.2.g.4. 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;
6.2.g.5. At least annually, an updated list of all
disputed and overdue reinsurance claims regarding reinsurance assumed from United
States domestic ceding insurers;
6.2.g.6. 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
6.2.g.7. Any other information that
the commissioner may reasonably require.
6.2.h. Change in Rating or Revocation of
Certification.
6.2.h.1. In the case of a downgrade
by a rating agency or other disqualifying circumstance, the commissioner shall upon
written notice assign a new rating to the certified reinsurer in accordance with the
requirements of paragraph 1, subdivision d of this subsection.
6.2.h.2. The commissioner 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 commissioner to reconsider the certified reinsurer's ability or
willingness to meet its contractual obligations.
6.2.h.3. If the rating of a certified reinsurer is
upgraded by the commissioner, the certified reinsurer may meet the security
requirements applicable to its new rating on a prospective basis, but the
commissioner 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 commissioner, the commissioner shall require the
certified reinsure to meet the security requirements applicable to its new rating
for all business it has assumed as a certified reinsurer.
6.2.h.4. Upon revocation of the certification of a
certified reinsurer by the commissioner, the assuming insurer shall be required to
post security in accordance with section 9 of this rule 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 5 of this rule, the
commissioner 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 commissioner to be at
high risk of uncollectibility.
6.3. Qualified Jurisdictions.
6.3.a. If, upon conducting an evaluation under
this section with respect to the reinsurance supervisory system of any non-U.S.
assuming insurer, the commissioner determines that the jurisdiction qualifies to be
recognized as a qualified jurisdiction, the commissioner shall publish notice and
evidence of such recognition in an appropriate manner. The commissioner may
establish a procedure to withdraw recognition of those jurisdictions that are not
longer qualified.
6.3.b. 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 commissioner 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 United States. The commissioner shall determine the
appropriate approach for evaluating the qualifications of such jurisdictions, and
create and publish on the commissioner's webpage a list of jurisdictions whose
reinsurers may be approved by the commissioner as eligible for certification. A
qualified jurisdiction must agree to share information and cooperate with the
commissioner with respect to all certified reinsurers domiciled within that
jurisdiction. Additional factors to be considered in determining whether to
recognized a qualified jurisdiction, in the discretion of the commissioner, include
but are not limited to the following:
6.3.b.1. The
framework under which the assuming insurer is regulated.
6.3.b.2. The structure and authority of the
domiciliary regulator with regard to solvency regulation requirements and financial
surveillance.
6.3.b.3. The substance of
financial and operating standards for assuming insurers in the domiciliary
jurisdiction.
6.3.b.4. 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.
6.3.b.5. The domiciliary
regulator's willingness to cooperate with United States regulators in general and
the commissioner in particular.
6.3.b.6.
The history of performance by assuming insurers in the domiciliary
jurisdiction.
6.3.b.7. Any documented
evidence of substantial problems with the enforcement of final United States
judgments in the domiciliary jurisdiction. A jurisdiction will not be considered to
be a qualified jurisdiction if the commissioner has determined that it does not
adequately and promptly enforce final United States judgements or arbitration
awards.
6.3.b.8. 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.
6.3.b.9. Any other matters deemed relevant by the
commissioner.
6.3.c. A list of
qualified jurisdictions shall be published through the National Association of
Insurance Commissioners' committee process. The commissioner shall consider this
list in determining qualified jurisdictions. If the commissioner approves a
jurisdiction as qualified that does not appear on the list of qualified
jurisdictions, the commissioner shall provide thoroughly documented justification
with respect to the criteria provided under subdivision b of this
subsection.
6.3.d. United States
jurisdictions that meet the requirements for accreditation under the National
Association of Insurance Commissioners financial standards and accreditation program
shall be recognized as qualified jurisdictions.
6.4. Recognition of Certification Issued by a National Association of Insurance Commissioners Accredited Jurisdiction.
6.4.a. If an applicant for certification has been
certified as a reinsurer in an a National Association of Insurance Commissioners'
accredited jurisdiction, the commissioner 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, as
adopted by the National Association of Insurance Commissioners, and such additional
information as the commissioner requires. The assuming insurer shall be considered
to be a certified reinsurer in this state.
6.4.b. 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 commissioner of any change in its status or rating within ten (10)
days after receiving notice of the change.
6.4.c. The commissioner may withdraw recognition
of the other jurisdiction's rating at any time and assign a new rating in accordance
with subdivision h, subsection 6.2 of this section.
6.4.d. The commissioner may withdraw recognition
of the other jurisdiction's certification at any time, with written notice to the
certified reinsurer. Unless the commissioner suspends or revokes the certified
reinsurer's certification in accordance with subdivision h, subsection 6.2 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.
6.5. Mandatory Funding Clause. In addition to the clauses required under section 13 of this rule, 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.
6.6. The commissioner shall comply with all reporting and notification requirements that may be established by the National Association of Insurance Commissioners with respect to certified reinsures and qualified jurisdictions.
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