§ 23-62-306 — Asset or reduction from liability for reinsurance ceded by domestic insurer to assuming insurer - Noncompliant assuming insurer

(a) (1) An asset or a reduction from liability for the reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of § 23-62-305 shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer. (2) The Insurance Commissioner shall promulgate rules necessary to implement this section that address: (A) The valuation of assets or reserve credits; (B) The amount and forms of security supporting reinsurance arrangements as described in § 23-62-308(b) ; and (C) The circumstances in which credit of a noncomplying assuming insurer shall be reduced or eliminated. (b) 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 ceding insurer, under a reinsurance contract with the assuming insurer as security for the payment of obligations thereunder, if the security is held: (1) In the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer; or (2) In the case of a trust, in a qualified United States financial institution as defined in § 23-62-307(b) . (c) The security may be in the form of: (1) Cash; (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) (A) Clean, irrevocable, unconditional letters of credit, issued or confirmed by a qualified United States financial institution as defined in § 23-62-307(a) , 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 insurer on or before the filing date of its annual statement. (B) Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance or confirmation, notwithstanding the issuing or confirming institution's subsequent failure to meet applicable standards of issuer acceptability, shall 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 Insurance Commissioner.

Legislative History

Amended by Act 2021, No. 672,§ 2, eff. 7/1/2021. Amended by Act 2015, No. 1223,§ 2, eff. 7/22/2015, applicable to cessation under reinsurance agreements issued, renewed, or amended on or after six (6) months after the effective date of this act. Acts 1991, No. 723, § 13; 2005, No. 506, § 14.