§ 521B.102 — Credit allowed certain domestic ceding insurers

Iowa § 521B.102

• Jurisdiction: Iowa
• Title XIII: COMMERCE
• Ch. 521B: CREDIT FOR REINSURANCE

Text

Credit for reinsurance shall be allowed a domestic ceding insurer as either an asset or a
reduction from liability on account of reinsurance ceded only when the reinsurer meets the
requirements of subsection 1, 2, 3, 4, 5, 6, or 7. The commissioner may adopt rules pursuant
to section 521B.105 specifying additional requirements related to the valuation of assets or
reserve credits, the amount and forms of security supporting reinsurance arrangements
described in section 521B.105, and the circumstances pursuant to which credit shall be
reduced or eliminated. Credit shall be allowed under subsection 1, 2, or 3 only respecting
cessions of those kinds or classes of business which the assuming insurer is licensed or
otherwise permitted to write or assume in the assuming insurer’s state of domicile or, in the
case of a United States branch of an alien assuming insurer, in the state through which the
alien assuming insurer is entered and licensed to transact insurance or reinsurance. Credit
shall be allowed under subsection 3 or 4 only if the applicable requirements of subsection 8
have been satisfied.
1. Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is
licensed to transact insurance or reinsurance in this state.
2. Credit shall be allowed when the reinsurance is ceded to an assuming insurer that
is accredited by the commissioner as a reinsurer in this state. In order to be eligible for
accreditation, an assuming insurer must do all of the following:
a. Filewiththecommissionerevidenceoftheassuminginsurer’ssubmissiontothisstate’s
jurisdiction.
b. Submit to this state’s authority to examine the assuming insurer’s books and records.
c. Be licensed to transact insurance or reinsurance in at least one state, or in the case
§521B.102, CREDIT FOR REINSURANCE 2
of a United States branch of an alien assuming insurer, be entered through and licensed to
transact insurance or reinsurance in at least one state.
d. File annually with the commissioner a copy of the assuming insurer’s annual statement
filed with the insurance department of the assuming insurer’s state of domicile and a copy of
the assuming insurer’s most recent audited financial statement.
e. Demonstrate to the satisfaction of the commissioner that the assuming insurer has
adequate financial capacity to meet the assuming insurer’s reinsurance obligations and is
otherwise qualified to assume reinsurance from domestic insurers. An assuming insurer
is deemed to meet this requirement as of the time of the assuming insurer’s application if
the assuming insurer maintains a surplus as regards policyholders in an amount of not less
than twenty million dollars and the assuming insurer’s accreditation has not been denied
by the commissioner within ninety calendar days after submission of the assuming insurer’s
application.
3. a. Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is
domiciled in, or in the case of a United States branch of an alien assuming insurer is entered
through,astatethatemploysstandardsregardingcreditforreinsurancethataresubstantially
similar to those applicable under this chapter and the assuming insurer or United States
branch of an alien assuming insurer does all of the following:
(1) Maintains a surplus as regards policyholders in an amount of not less than twenty
million dollars.
(2) Submits to the authority of this state to examine the assuming insurer’s books and
records.
b. The requirement of paragraph “a”, subparagraph (1), does not apply to reinsurance
ceded and assumed pursuant to pooling arrangements among insurers in the same holding
company system.
4. a. Credit shall be allowed when the reinsurance is ceded to an assuming insurer that
maintains a trust fund in a qualified United States financial institution, as defined in section
521B.104, subsection 2, for payment of the valid claims of the assuming insurer’s United
States ceding insurers, their assigns, and successors in interest. To enable the commissioner
to determine the sufficiency of the trust fund, the assuming insurer shall report annually
to the commissioner information substantially the same as that required to be reported by
licensed insurers on the NAIC annual statement form. The assuming insurer shall submit to
examination of the assuming insurer’s books and records by the commissioner and bear the
expense of examination.
b. Credit for reinsurance shall not be granted under this subsection unless all of the
following conditions are satisfied:
(1) The form of the trust and any amendments to the trust have been approved by either
of the following:
(a) The commissioner of the state where the trust is domiciled.
(b) The commissioner of another state who, pursuant to the terms of the trust instrument,
has accepted principal regulatory oversight of the trust.
(2) The form of the trust and any trust amendments are filed with the commissioner of
every state in which the ceding insurer beneficiaries of the trust are domiciled. The trust
instrument shall provide that contested claims are valid and enforceable upon the final order
of any court of competent jurisdiction in the United States. The trust shall vest legal title to
the trust’s assets in its trustees for the benefit of the assuming insurer’s United States ceding
insurers, their assigns, and successors in interest. The trust and the assuming insurer shall
be subject to examination as determined by the commissioner.
(3) The trust remains in effect for as long as the assuming insurer has outstanding
obligations due under the reinsurance agreements subject to the trust. No later than
February 28 of each year, the trustee of the trust shall report to the commissioner in writing
the balance of the trust and list 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 will not
expire prior to the following December 31.
c. The following requirements apply to the following categories of assuming insurer:
(1) Thetrustfundforasingleassuminginsurershallconsistoffundsintrustinanamount
3 CREDIT FOR REINSURANCE, §521B.102
not less than the assuming insurer’s liabilities attributable to reinsurance ceded by United
Statescedinginsurers,andinaddition,theassuminginsurershallmaintainatrusteedsurplus
of not less than twenty million dollars, except as provided in subparagraph (2).
(2) At any time after an assuming insurer has permanently discontinued underwriting
new business secured by the trust for at least three full years, the commissioner 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
trusteed surplus level is adequate for the protection of United States ceding insurers,
policyholders, and claimants in light of reasonably foreseeable adverse loss development.
The risk assessment may involve an 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 shall not be reduced to an amount less than thirty
percent of the assuming insurer’s liabilities attributable to reinsurance ceded by United
States ceding insurers covered by the trust.
(3) In the case of a group including incorporated and individual unincorporated
underwriters, all of the following requirements are met:
(a) For reinsurance ceded under reinsurance agreements with an inception, amendment,
or renewal date on or after January 1, 1993, the trust shall consist of a trusteed account in an
amount not less than the respective underwriters’ several liabilities attributable to business
ceded by United States domiciled ceding insurers to any underwriter of the group.
(b) 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 chapter, the trust shall consist of a trusteed account in an amount
not less than the respective underwriters’ several insurance and reinsurance liabilities
attributable to business written in the United States.
(c) In addition to the trusts described in subparagraph divisions (a) and (b), the group
shall maintain in trust a trusteed surplus of which one hundred million dollars shall be held
jointly for the benefit of the United States domiciled ceding insurers of any member of the
group for all years of account.
(d) 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 of the group.
(e) Within ninety calendar days after its financial statements are due to be filed with
the group’s domiciliary regulator, the group shall provide to the commissioner an annual
certification by the group’s domiciliary regulator of the solvency of each underwriter
member, or if a certification is unavailable, financial statements, prepared by independent
public accountants, of each underwriter member of the group.
(4) In the case of a group of incorporated underwriters under common administration,
the group shall meet all of the following requirements:
(a) Have continuously transacted an insurance business outside the United States for at
least three years immediately prior to making application for accreditation.
(b) Maintain aggregate policyholders’ surplus of at least ten billion dollars.
(c) Maintain a trust fund in an amount not less than the group’s several liabilities
attributable to business ceded by United States domiciled ceding insurers to any member of
the group pursuant to reinsurance contracts issued in the name of the group.
(d) In addition, maintain a joint trusteed surplus of which one hundred million dollars
shall be held jointly for the benefit of United States domiciled ceding insurers of any member
of the group as additional security for these liabilities.
(e) Within ninety calendar days after the group’s financial statements are due to be
filed with the group’s domiciliary regulator, make available to the commissioner an annual
certification of each underwriter member’s solvency by the member’s domiciliary regulator
and financial statements of each underwriter member of the group prepared by the group’s
independent public accountant.
§521B.102, CREDIT FOR REINSURANCE 4
5. Credit shall be allowed when the reinsurance is ceded to an assuming insurer that has
been certified by the commissioner as a reinsurer in this state and the assuming reinsurer
secures its obligations in accordance with the following requirements:
a. In order to be eligible for certification, the assuming insurer shall meet all of the
following requirements:
(1) The assuming insurer shall be domiciled and licensed to transact insurance or
reinsurance in a qualified jurisdiction, as determined by the commissioner pursuant to
paragraph “c”.
(2) The assuming insurer shall maintain minimum capital and surplus, or its equivalent,
in an amount to be determined by the commissioner pursuant to rule.
(3) Theassuminginsurershallmaintainfinancialstrengthratingsfromtwoormorerating
agencies deemed acceptable by the commissioner pursuant to rule.
(4) The assuming insurer shall agree to submit to the jurisdiction of this state, to appoint
the commissioner as the assuming insurer’s agent for service of process in this state, and to
provide security for one hundred percent of the assuming insurer’s liabilities attributable
to reinsurance ceded by United States ceding insurers, if the assuming insurer resists
enforcement of a final United States judgment.
(5) The assuming insurer shall agree to meet applicable information filing requirements
asdeterminedbythecommissioner, bothwithrespecttoaninitialapplicationforcertification
and on an ongoing basis.
(6) The assuming insurer shall satisfy any other requirements for certification deemed
relevant by the commissioner.
b. Anassociationincludingincorporatedandindividualunincorporatedunderwritersmay
be a certified reinsurer. In order to be eligible for certification, the association shall satisfy
the requirements of paragraph “a” and in addition satisfy all of the following requirements:
(1) The association shall satisfy the association’s minimum capital and surplus
requirements through the capital and surplus equivalents, net of liabilities, of the association
and its members, which shall include a joint central fund that may be applied to any
unsatisfied obligation of the association or any of its members, in an amount determined by
the commissioner to provide adequate protection.
(2) The incorporated members of the association shall not be engaged in any business
other than underwriting as a member of the association and shall be subject to the same
level of regulation and solvency control by the association’s domiciliary regulator as are the
unincorporated members of the association.
(3) Within ninety calendar days after the association’s financial statements are due
to be filed with the association’s domiciliary regulator, the association shall provide to
the commissioner an annual certification by the association’s domiciliary regulator of
the solvency of each underwriter member, or if a certification is unavailable, financial
statements, prepared by an independent public accountant, of each underwriter member of
the association.
c. The commissioner shall create and publish a list of qualified jurisdictions under which
an assuming insurer licensed and domiciled in such jurisdiction is eligible to be considered
for certification by the commissioner as a certified reinsurer.
(1) In order to determine whether the domiciliary jurisdiction of a non-United States
assuming insurer is eligible to be recognized as a qualified jurisdiction, the commissioner
shall evaluate the appropriateness and effectiveness of the reinsurance supervisory system
of the jurisdiction, both initially and on an ongoing basis, and consider the rights, benefits,
and the extent of reciprocal recognition afforded by the non-United States jurisdiction to
reinsurers licensed and domiciled in the United States. In order to be recognized as a
qualified jurisdiction, a jurisdiction must agree to share information and to cooperate with
the commissioner with respect to all certified reinsurers domiciled within that jurisdiction.
A jurisdiction shall not be recognized as a qualified jurisdiction if the commissioner has
determined that the jurisdiction does not adequately and promptly enforce final United
States judgments and arbitration awards. Additional factors may be considered in the
discretion of the commissioner.
(2) A list of qualified jurisdictions shall be published through the NAIC committee
5 CREDIT FOR REINSURANCE, §521B.102
process. The commissioner shall consider this list in determining qualified jurisdictions.
If the commissioner recognizes a jurisdiction as qualified that does not appear on the
NAIC list of qualified jurisdictions, the commissioner shall provide thoroughly documented
justification for the recognition in accordance with criteria as specified in rules adopted by
the commissioner.
(3) United States jurisdictions that meet the requirements for accreditation under
the NAIC financial standards and accreditation program shall be recognized as qualified
jurisdictions.
(4) If a certified reinsurer’s domiciliary jurisdiction ceases to be a qualified jurisdiction,
thecommissionermay, inthecommissioner’sdiscretion, suspendthereinsurer’scertification
indefinitely, in lieu of revocation.
d. The commissioner shall assign a rating to each certified reinsurer, giving due
consideration to the financial strength ratings that have been assigned by rating agencies
deemed acceptable to the commissioner pursuant to rule. The commissioner shall publish a
list of all certified reinsurers and their ratings.
e. A certified reinsurer shall secure obligations assumed from United States ceding
insurers under this subsection at a level consistent with the certified reinsurer’s rating, as
specified in rules adopted by the commissioner.
(1) In order for a domestic ceding insurer to qualify for full financial statement credit for
reinsurance ceded to a certified reinsurer, the certified reinsurer shall maintain security in a
form acceptable to the commissioner and consistent with the provisions of section 521B.103,
or in a multibeneficiary trust in accordance with subsection 4, except as otherwise provided
in this subsection.
(2) If a certified reinsurer maintains a trust to fully secure its obligations subject to
subsection 4, and chooses to secure its obligations incurred as a certified reinsurer in the
form of a multibeneficiary trust, the certified reinsurer shall maintain separate trust accounts
for its obligations incurred under reinsurance agreements issued or renewed as a certified
reinsurer with reduced security as permitted by this subsection or comparable laws of other
United States jurisdictions and for its obligations subject to subsection 4. It shall be a
condition to the grant of certification under this subsection that the certified reinsurer shall
bind itself, by the language of the trust and by agreement with the commissioner which has
principal regulatory oversight of each such trust account, to fund, upon termination of any
such trust account, any deficiency of any other trust account out of the remaining surplus of
the terminated trust account.
(3) The minimum trusteed surplus requirements provided in subsection 4 are not
applicable with respect to a multibeneficiary trust maintained by a certified reinsurer for the
purpose of securing obligations under this subsection, except that such a multibeneficiary
trust shall maintain a minimum trusteed surplus of ten million dollars.
(4) With respect to obligations incurred by a certified reinsurer under this subsection, if
the security is insufficient, the commissioner shall reduce the allowable credit by an amount
proportionate to the deficiency, and the commissioner has the discretion to impose further
reductions in allowable credit upon finding that there is a material risk that the certified
reinsurer’s obligations will not be paid in full when due.
(5) For purposes of this subsection, a certified reinsurer whose certification has been
terminated for any reason shall be treated as a certified reinsurer required to secure all of
its obligations.
(a) As used in this subsection, the term “terminated” includes revocation, suspension,
voluntary surrender, and inactive status.
(b) If the commissioner continues to assign a higher rating to a certified reinsurer as
permitted by other provisions of this section, this requirement does not apply to a certified
reinsurer in inactive status or to a reinsurer whose certification has been suspended.
f. If an assuming insurer applying for certification as a reinsurer in this state has been
certified as a reinsurer in another jurisdiction accredited by the NAIC, the commissioner has
the discretion to defer to that jurisdiction’s certification, and has the discretion to defer to
the rating assigned by that jurisdiction, and the assuming insurer shall be considered to be a
certified reinsurer in this state.
§521B.102, CREDIT FOR REINSURANCE 6
g. A certified reinsurer that ceases to assume new business in this state may request to
maintain the reinsurer’s certification in inactive status in order to qualify for a reduction in
the amount of security required for the reinsurer’s in-force business. An inactive certified
reinsurer shall continue to comply with all applicable requirements of this subsection, and
the commissioner shall assign the reinsurer a rating that takes into account, if relevant, the
reasons why the reinsurer is not assuming new business.
6. a. Credit shall be allowed when the reinsurance is ceded to an assuming insurer that
meets all of the following conditions:
(1) The assuming insurer must have its head office located in or be domiciled in, as
applicable, and be licensed in, a reciprocal jurisdiction. For purposes of this subsection, a
“reciprocal jurisdiction” is a jurisdiction that meets at least one of the following requirements:
(a) A non-United States 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 Tit. V, §502(a)(3), 31 U.S.C. §313-314, of the Dodd-Frank Wall Street Reform
and Consumer Protection Act, Pub. L. No. 111-203, that is currently in effect or in a period
of provisional application and that 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 United States jurisdiction that meets the requirements for accreditation under the
NAIC financial regulation standards and accreditation program.
(c) A qualified jurisdiction, as determined by the commissioner pursuant to subsection 5,
paragraph “c”, which is not otherwise described in this paragraph or paragraph “b”, and that
meets certain additional requirements consistent with the terms and conditions of an in-force
covered agreement as specified in rules adopted by the commissioner.
(2) The assuming insurer must have and maintain, on an ongoing basis, minimum
capital and surplus, or its equivalent, calculated according to the methodology of the
assuming insurer’s domiciliary jurisdiction, in an amount specified in rules adopted by
the commissioner. If the assuming insurer is an association, including incorporated and
individual unincorporated underwriters, the assuming insurer must have and maintain, on
an ongoing basis, minimum capital and surplus equivalents, net of liabilities, calculated
according to the methodology applicable in the assuming insurer’s domiciliary jurisdiction,
and a central fund containing a balance in an amount as specified in rules adopted by the
commissioner.
(3) The assuming insurer must have and maintain, on an ongoing basis, a minimum
solvency or capital ratio, as applicable, as specified in rules adopted by the commissioner. If
the assuming insurer is an association, including incorporated and individual unincorporated
underwriters, theassuminginsurermusthaveandmaintain, onanongoingbasis, aminimum
solvency or capital ratio in the reciprocal jurisdiction where the assuming insurer has its
head office or is domiciled, as applicable, and where the assuming insurer is also licensed.
(4) The assuming insurer must agree and shall provide to the commissioner, in the form
and manner specified by the commissioner, adequate assurance of all of the following:
(a) Prompt written notice and explanation if the assuming insurer falls below the
minimum requirements set forth in subparagraph (2) or (3) of this paragraph, or if any
regulatory action is taken against the assuming insurer for serious noncompliance with any
applicable law.
(b) Written consent that the assuming insurer shall submit 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 also require that consent for service of process be included
in each reinsurance agreement entered into by the assuming insurer. This subparagraph
division shall not limit or alter the capacity of the parties to a reinsurance agreement to agree
to alternative dispute resolution, except to the extent such alternative dispute resolution is
unenforceable under applicable insolvency or delinquency laws.
(c) Written agreement that the assuming insurer shall pay all final judgments, wherever
7 CREDIT FOR REINSURANCE, §521B.102
enforcement is sought, obtained against the assuming insurer by a ceding insurer, or the
ceding insurer’s legal successor, that have been declared enforceable in the jurisdiction in
which the final judgment is obtained.
(d) Each reinsurance agreement must include a provision requiring the assuming insurer
to provide security in an amount equal to one hundred percent of the assuming insurer’s
liabilities attributable to reinsurance ceded pursuant to that reinsurance agreement if the
assuming insurer resists enforcement of a final judgment that is enforceable under the law of
the jurisdiction in which the final judgment is obtained or under an enforceable arbitration
award, whether obtained by the ceding insurer or by the ceding insurer’s legal successor on
behalf of the ceding insurer’s resolution estate.
(e) Written confirmation that the assuming insurer is not presently participating in any
solvent scheme of arrangement which involves this state’s ceding insurers, and written
agreement that the assuming insurer shall notify the ceding insurer and the commissioner
and shall provide security in an amount equal to one hundred percent of the assuming
insurer’s liabilities to the ceding insurer, should the assuming insurer enter into such
a solvent scheme of arrangement. Such security shall be in a form consistent with the
provisions of subsection 5, and section 521B.103.
(5) The assuming insurer or the assuming insurer’s legal successor shall provide to the
commissioner, on behalf of itself and any legal predecessors, any documentation required
pursuant to rules adopted by the commissioner.
(6) Pursuant to rules adopted by the commissioner, the assuming insurer shall maintain
prompt payment of claims under all reinsurance agreements.
(7) The assuming insurer’s supervisory authority shall annually confirm to the
commissioner that as of the preceding December 31, or as of the annual date otherwise
statutorily reported to the reciprocal jurisdiction, the assuming insurer complies with the
requirements set forth in subparagraphs (2) and (3) of this paragraph.
(8) An assuming insurer shall not be precluded from voluntarily providing any
information to the commissioner.
b. The commissioner shall timely create and publish a list of reciprocal jurisdictions.
(1) The commissioner’s list shall include any reciprocal jurisdiction as defined under
paragraph “a”, subparagraph (1), subparagraph divisions (a) and (b), and the commissioner
shall consider any other reciprocal jurisdiction included on the list of reciprocal jurisdictions
published through the NAIC committee process. Pursuant to criteria established by rules
adopted by the commissioner, the commissioner may approve a jurisdiction that does not
appear on the NAIC list of reciprocal jurisdictions.
(2) 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, pursuant to a process established by rules adopted by the commissioner, except
that the commissioner shall not remove a reciprocal jurisdiction as defined under paragraph
“a”, subparagraph (1), subparagraph divisions (a) and (b). Upon removal of a reciprocal
jurisdiction from the list of reciprocal jurisdictions, credit for reinsurance ceded to an
assuming insurer which has its home office in or is domiciled in that reciprocal 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 in this subsection and to which cessions shall be granted
credit pursuant to this subsection. The commissioner may add an assuming insurer to
the list if a NAIC accredited jurisdiction has added the assuming insurer to the NAIC
accredited jurisdiction’s list of assuming insurers or if, upon initial eligibility, the assuming
insurer submits the information required under paragraph “a”, subparagraph (4), to the
commissioner and complies with any additional requirements pursuant to rules adopted by
the commissioner, except to the extent that any of those rules 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 subsection, the commissioner may revoke or suspend the
eligibility of the assuming insurer for recognition under this subsection in accordance with
procedures established by rules adopted by the commissioner.
§521B.102, CREDIT FOR REINSURANCE 8
(1) While an assuming insurer’s eligibility is suspended, any reinsurance agreement
issued, amended, or renewed after the effective date of the suspension does not qualify for
credit except to the extent that the assuming insurer’s obligations under the reinsurance
agreement are secured in accordance with section 521B.103.
(2) If an assuming insurer’s eligibility is revoked, credit for reinsurance shall not 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
reinsurance agreement are secured in a form acceptable to the commissioner and consistent
with the provisions of section 521B.103.
e. If subject to a legal process of rehabilitation, liquidation, or conservation, as applicable,
the ceding insurer or the ceding insurer’s representative may seek, and if determined
appropriate by the court in which such legal process is pending, may obtain an order
requiring that the assuming insurer post security for all outstanding ceded liabilities.
f. This subsection shall not limit or alter the capacity of the parties to a reinsurance
agreementtoagreeonrequirementsforsecurityorothertermsinthereinsuranceagreement,
except as expressly prohibited by this chapter or any other applicable law or regulation.
g. (1) Creditmaybetakenunderthissubsectiononlyforreinsuranceagreementsentered
into, amended, or renewed on or after July 1, 2020, and only with respect to losses incurred
and reserves reported on or after the later of the date on which the assuming insurer has
met all eligibility requirements pursuant to this subsection, and the effective date of the new
reinsurance agreement, amendment, or renewal.
(2) This paragraph shall not alter or impair a ceding insurer’s right to take credit for
reinsurance, to the extent that credit is not available under this subsection, as long as the
reinsurance qualifies for credit under any other applicable provision of this chapter.
h. This subsection shall not authorize an assuming insurer to withdraw or reduce the
security provided under any reinsurance agreement except as permitted by the terms of the
reinsurance agreement.
i. This subsection shall not limit or alter the capacity of parties to any reinsurance
agreement to renegotiate the reinsurance agreement.
7. Credit shall be allowed when reinsurance is ceded to an assuming insurer that does not
meet the requirements of subsection 1, 2, 3, 4, 5, or 6, but only as to the insurance of risks
located in jurisdictions where the reinsurance is required by applicable law or regulation of
that jurisdiction.
8. a. If the assuming insurer is not licensed, accredited, or certified to transact insurance
or reinsurance in this state, the credit permitted by subsections 3 and 4 shall not be allowed
unless the assuming insurer agrees in the reinsurance agreement to do all of the following:
(1) In the event of the failure of the assuming insurer to perform its obligations under
the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding
insurer, shall submit to the jurisdiction of any court of competent jurisdiction in any state of
the United States, shall comply with all requirements necessary to give the court jurisdiction,
and shall abide by the final decision of the court or of any appellate court in the event of any
appeal, concerning such failure.
(2) The assuming insurer shall designate the commissioner or a designated attorney as its
true and lawful attorney to receive lawful process in any action, suit, or proceeding instituted
by or on behalf of the ceding insurer.
b. This subsection is not intended to conflict with or override the obligation of the parties
to a reinsurance agreement to arbitrate a dispute if the obligation for the parties to arbitrate
disputes is created in the reinsurance agreement.
9. If the assuming insurer does not meet the requirements of subsection 1, 2, 3, or 6, the
credit permitted by subsection 4 or 5 shall not be allowed unless the assuming insurer agrees
in a trust agreement to satisfy the following conditions:
a. Notwithstanding any other provisions contained in the trust instrument, if the trust
fund is inadequate because the trust fund contains an amount less than the amount required
by subsection 4, paragraph “c”, or if the grantor of the trust has been declared insolvent or
has been placed into receivership, rehabilitation, liquidation, or similar proceedings under
9 CREDIT FOR REINSURANCE, §521B.102
the laws of the trust’s 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 all of the assets of the trust fund to the
commissioner with regulatory oversight over the trust.
b. The assets of the trust shall be distributed, and claims shall be filed and valued, by the
commissionerwithregulatoryoversightoverthetrustinaccordancewiththelawsofthestate
in which the trust is domiciled that are 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 of the trust fund are not necessary to satisfy the claims of the
United States ceding insurers of the grantor of the trust, the assets of the trust or any part of
those assets shall be returned by the commissioner with regulatory oversight over the trust
to the trustee for distribution in accordance with the trust agreement.
d. ThegrantorshallwaiveanyrightotherwiseavailabletothegrantorunderUnitedStates
law that is inconsistent with the provisions of this subsection.
10. If an accredited or certified reinsurer ceases to meet the requirements for
accreditation or certification pursuant to this section, the commissioner may suspend or
revoke the reinsurer’s accreditation or certification.
a. The commissioner shall give the reinsurer notice and opportunity for hearing prior to
such suspension or revocation. The suspension or revocation shall not take effect until after
the commissioner’s order on hearing unless one of the following applies:
(1) The reinsurer waives its right to hearing.
(2) The commissioner’s order is based on regulatory action by the reinsurer’s domiciliary
jurisdiction or by the voluntary surrender or termination of the reinsurer’s eligibility to
transact insurance or reinsurance business in the reinsurer’s domiciliary jurisdiction or in
the primary certifying state of the reinsurer under subsection 5, paragraph “f”.
(3) The commissioner finds that an emergency requires immediate action and a court of
competent jurisdiction has not stayed the commissioner’s action.
b. While a reinsurer’s accreditation or certification is suspended, a reinsurance contract
issued or renewed after the effective date of the suspension does not qualify for credit except
to the extent that the reinsurer’s obligations under the reinsurance contract are secured in
accordance with section 521B.103. If a reinsurer’s accreditation or certification is revoked,
credit for reinsurance shall not be granted after the effective date of the revocation except
to the extent that the reinsurer’s obligations under the reinsurance contract are secured in
accordance with subsection 5, paragraph “e”, or section 521B.103.
11. a. A domestic ceding insurer shall take steps to manage its reinsurance recoverables
proportionate to its own book of business. A domestic ceding insurer shall notify the
commissioner within thirty calendar days after reinsurance recoverables from any single
assuming insurer, or group of affiliated assuming insurers, exceeds fifty percent of the
domestic ceding insurer’s last reported surplus to policyholders, or after the domestic ceding
insurer has determined that reinsurance recoverables from any single assuming insurer, or
group of affiliated assuming insurers, is likely to exceed this limit. The notification shall
demonstrate that the exposure is safely managed by the domestic ceding insurer.
b. A domestic ceding insurer shall take steps to diversify its reinsurance program. A
domesticcedinginsurershallnotifythecommissionerwithinthirtycalendardaysafterceding
to any single assuming insurer, or group of affiliated assuming insurers, more than twenty
percent of the domestic ceding insurer’s gross written premium in the prior calendar year,
or after the domestic ceding insurer has determined that the reinsurance ceded to any single
assuming insurer, or group of affiliated assuming insurers, is likely to exceed this limit. The
notification shall demonstrate that the exposure is safely managed by the domestic ceding
insurer.