(a)Credit shall be allowed when the reinsurance is ceded to an assuming insurer meeting each of the following conditions:
(1)The assuming insurer shall have its head office or be domiciled in, as applicable, and be licensed in a reciprocal jurisdiction. A reciprocal jurisdiction is a jurisdiction that meets one of the following:
a. A non-U.S. jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority, or, in the case of a covered agreement between the United States and 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 effec Free access — add to your briefcase to read the full text and ask questions with AI
(a) Credit shall be allowed when the reinsurance is ceded to an assuming insurer meeting each of the following conditions:
(1) The assuming insurer shall have its head office or be domiciled in, as applicable, and be licensed in a reciprocal jurisdiction. A reciprocal jurisdiction is a jurisdiction that meets one of the following:
a. A non-U.S. jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority, or, in the case of a covered agreement between the United States and 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.
b. A U.S. jurisdiction that meets the requirements for accreditation under the NAIC financial standards and accreditation program.
c. A qualified jurisdiction, as determined by the commissioner pursuant to subsection (c) of Section 27-5B-8, which is not otherwise described in paragraph a. or b. and which meets certain additional requirements, consistent with the terms and conditions of in-force covered agreements, as specified by the commissioner by rule.
(2) The assuming insurer shall have and maintain, on an ongoing basis, minimum capital and surplus, or its equivalent, calculated according to the methodology of its domiciliary jurisdiction, in an amount to be set forth in regulation. If the assuming reinsurer is an association, including incorporated and individual unincorporated underwriters, it shall have and maintain, on an ongoing basis, minimum capital and surplus equivalents, net of liabilities, calculated according to the methodology applicable in its domiciliary jurisdiction, and a central fund containing a balance in amounts to set forth by rule.
(3) The assuming insurer shall have and maintain, on an ongoing basis, a minimum solvency or capital ratio, as applicable, which shall be set forth by rule. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it shall have and maintain, on an ongoing basis, a minimum solvency or capital ratio in the reciprocal jurisdiction where the assuming insurer has its head office or is domiciled, as applicable, and is also licensed.
(4) The assuming insurer shall agree and provide adequate assurance to the commissioner, in a form specified by the commissioner pursuant to rule, to all of the following:
a. The assuming insurer shall provide prompt written notice and explanation to the commissioner if it falls below the minimum requirements set forth in subdivisions (2) and (3), or if any regulatory action is taken against it for serious noncompliance with applicable law.
b. The assuming insurer shall consent in writing to the jurisdiction of the courts of this state and to the appointment of the commissioner as agent for service of process. The commissioner may require that consent for service of process be provided to the commissioner and included in each reinsurance agreement. Nothing in this paragraph 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 the agreements are unenforceable under applicable insolvency or delinquency laws.
c. The assuming insurer shall consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer or its legal successor, which have been declared enforceable in the jurisdiction where the judgment was obtained.
d. Each reinsurance agreement shall include a provision requiring the assuming insurer to provide security in an amount equal to 100 percent 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 resolution estate.
e. The assuming insurer shall 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 commissioner and to provide security in an amount equal to 100 percent of the assuming insurer’s liabilities to the ceding insurer should the assuming insurer enter into such a solvent scheme of arrangement. The security shall be in a form consistent with Sections 27-5B-8 and 27-5B-14 and as specified by the commissioner by rule.
(5) The assuming insurer or its legal successor shall provide, if requested by the commissioner, on behalf of itself and any legal predecessors, certain documentation to the commissioner as specified by the commissioner by rule.
(6) The assuming insurer shall maintain a practice of prompt payment of claims under reinsurance agreements pursuant to criteria set forth by rule.
(7) The assuming insurer’s supervisory authority shall confirm to the commissioner on an annual basis, as of the preceding December 31 or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, that the assuming insurer complies with the requirements set forth in subdivisions (2) and (3).
(8) Nothing in this subsection precludes an assuming insurer from providing the commissioner with information on a voluntary basis.
(b)(1) The commissioner shall timely create and publish a list of reciprocal jurisdictions.
(2) A list of reciprocal jurisdictions is published through the NAIC Committee Process. The commissioner’s list shall include any reciprocal jurisdiction, as defined in paragraph a. or b. of subdivision (a)(1), and shall consider any other reciprocal jurisdiction included on the NAIC list. The commissioner may approve a jurisdiction that does not appear on the NAIC list of reciprocal jurisdictions in accordance with criteria to be developed under rules adopted by the commissioner.
(3) The commissioner may remove a jurisdiction from the list of reciprocal jurisdictions upon a determination that the jurisdiction no longer meets the requirements of a reciprocal jurisdiction in accordance with a process set forth in rules adopted by the commissioner, except that the commissioner shall not remove from the list a reciprocal jurisdiction as defined in paragraph a. or b. of subdivision (1) of subsection (a). Upon removal of a reciprocal jurisdiction from this list, credit for reinsurance ceded to an assuming insurer which has its home office or is domiciled in that jurisdiction shall be allowed, if otherwise allowed pursuant to this chapter.
(c) The commissioner 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. The commissioner may add an assuming insurer to the list if an NAIC accredited jurisdiction has added the assuming insurer to a list of assuming insurers or if, upon initial eligibility, the assuming insurer submits the information to the commissioner as required under subdivision (a)(4) and complies with any additional requirements that the commissioner may impose by rule, except to the extent that they conflict with an applicable covered agreement.
(d) 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 for recognition under this section in accordance with procedures set forth by rule.
(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 27-5B-14.
(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 commissioner and consistent with Section 27-5B-14.
(e) 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 ceded liabilities.
(f) Nothing in this section shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in that reinsurance agreement, except as expressly prohibited by this chapter or other applicable law or rule.
(g)(1) Credit may be taken under this section only for reinsurance agreements entered into, amended, or renewed on or after January 1, 2022, and only with respect to losses incurred and reserves reported on or after the later of: a. the date on which the assuming insurer has met all eligibility requirements pursuant to subsection (a), and b. the effective date of the new reinsurance agreement, amendment, or renewal.
(2) This subsection does not alter or impair a ceding insurer’s right to take credit for reinsurance, to the extent that credit is not available under this section, as long as the reinsurance qualified for credit under any other applicable provision of this chapter.
(3) Nothing in this section shall authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement except as permitted by the terms of the agreement.
(4) Nothing in this section shall limit or in any way alter the capacity of parties to any reinsurance agreement to renegotiate the agreement.