§ 22:651 — Reinsurance credits

Louisiana § 22:651

• Jurisdiction: Louisiana
• Title 22: Insurance

Text

§651. Reinsurance credits
A. The commissioner shall allow credit for reinsurance to a domestic ceding insurer
as either an asset or deduction from liability when the assuming insurer satisfies the
requirements of Subsection B, C, D, E, F, or G of this Section. Additionally, the
commissioner may adopt by regulation pursuant to R.S. 22:661(B) specific additional
requirements relating to or setting forth the valuation of assets or reserve credits, the amount
and forms of security supporting reinsurance arrangements described in R.S. 22:661(B), or
the circumstances pursuant to which credit will be reduced or eliminated. The commissioner
shall allow credit under Subsection B or C of this Section pertaining only to cessions of those
kinds or classes of business that the assuming insurer is licensed or otherwise permitted to
write or assume in its state of domicile or, in the case of a United States branch of an alien
assuming insurer, in the state through which it is entered and licensed to transact insurance
or reinsurance. The commissioner shall allow the credit for reinsurance pursuant to
Subsection D of this Section only if the assuming insurer satisfies the requirements of
Subsection H of this Section.
B. The commissioner shall allow credit for reinsurance when the assuming insurer
holds a certificate of authority to transact insurance or reinsurance in this state.
C. The commissioner shall allow credit for reinsurance when the assuming insurer
is an accredited reinsurer in this state. To be eligible for accreditation and to receive the
commissioner's approval of its application for accreditation, a reinsurer shall complete each
of the following:
(1) File with the commissioner evidence of its submission to the jurisdiction of this
state.
(2) Submit to the authority of the commissioner to examine its books and records.
(3) Demonstrate that it is licensed or authorized to transact insurance or reinsurance
in, or in the case of a United States branch of an alien assuming insurer, is entered through,
at least one state that employs standards regarding credit for reinsurance equal to or
exceeding those applicable under this Subpart.
(4) File annually with the commissioner a true copy of its annual statement filed with
the insurance regulator of its state of domicile and a copy of its most recent audited financial
statement.
(5) Demonstrate to the satisfaction of the commissioner that it has adequate financial
capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance
from domestic insurers. The commissioner shall deem that an assuming insurer meets this
requirement as of the time of its application if it maintains a surplus as regards policyholders
in an amount not less than twenty million dollars and the commissioner has not denied it
accreditation within ninety days after submission of its application.
D.(1) The commissioner shall allow a domestic ceding insurer credit for reinsurance
under Paragraph (2) of this Subsection when the reinsurance is ceded to an assuming insurer
that maintains a trust fund in a qualified United States financial institution, as defined in R.S.
22:653(B), for the payment of the valid claims of its United States policyholders and ceding
insurers, their assigns, and successors in interest. The assuming insurer shall report and
submit annually to the commissioner information substantially the same as that required to
be reported on the National Association of Insurance Commissioners (NAIC) annual
statement form by authorized insurers to enable the commissioner to determine the
sufficiency of the trust fund. The assuming insurer shall submit to examination of its books
and records by the commissioner and bear the expense of examination.
(2)(a) The commissioner shall not grant credit for reinsurance under this Subsection
unless the form of the trust and any amendments to the trust receive the approval of either
of the following:
(i) The commissioner of the state of domicile of the trust.
(ii) The commissioner of another state who, pursuant to the terms of the trust
instrument, accepts principal regulatory oversight of the trust.
(b) The assuming insurer shall also file the form of the trust and any trust
amendments with the commissioner of every domiciliary state of the ceding insurer
beneficiaries of the trust. The trust instrument shall provide that contested claims shall be
valid and enforceable upon the final order of any court of competent jurisdiction in the
United States. The trust shall vest legal title to its 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.
(c) The trust shall remain in effect for as long as the assuming insurer has
outstanding obligations due under the reinsurance agreements subject to the trust. No later
than the last day of February 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 thirty-first day of December.
(3)(a) In the case of a single assuming insurer, the trust fund shall consist of funds
in trust in an amount not less than the assuming insurer's liabilities attributable to business
written in the United States and, in addition, the assuming insurer shall maintain a trusteed
surplus of not less than twenty million dollars, except as provided in Subparagraph (b) of this
Paragraph.
(b) At any time after the 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 surplus level is adequate for the protection of the 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 flow, 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 may 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.
(c) In the case of a group of assuming insurers that includes incorporated and
individual unincorporated underwriters, the following provisions apply:
(i) 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.
(ii) 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 Subpart, 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.
(iii) In addition to these trusts, 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 or any member of the group for all years of account.
(iv) The incorporated members of the group shall not engage 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.
(v) Within ninety 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.
(d) In the case of a group of incorporated underwriters under common
administration, the group shall:
(i) Submit to the commissioner's authority to examine its books and records and bear
the expense of any examination.
(ii) Maintain aggregate policyholders' surplus of ten billion dollars.
(iii) Maintain a trust fund in an amount not less than the group's several liabilities
attributable to business ceded by United States ceding insurers to any member of the group.
(iv) In addition, maintain a joint trusteed surplus of which one hundred million
dollars shall be held jointly for the benefit of the United States ceding insurers of any
member of the group as additional security for these liabilities.
(v) Within ninety days after its financial statements are due to be filed with the
group's domiciliary regulator make available to the commissioner an annual certification of
the member's solvency by the member's domiciliary regulator and financial statements of
each underwriter member of the group audited by independent public accountants.
E.(1) The commissioner shall allow credit for reinsurance when the assuming insurer
is a certified reinsurer in this state and secures its obligations in accordance with the
requirements of this Subsection. To be eligible for certification, the assuming insurer shall
meet the following requirements:
(a) 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 (3) of this Subsection.
(b) The assuming insurer shall maintain minimum capital and surplus or its
equivalent, in an amount determined by the commissioner, pursuant to regulation.
(c) The assuming insurer shall maintain financial strength ratings from two or more
rating agencies deemed acceptable by the commissioner pursuant to regulation.
(d) The assuming insurer shall agree to submit to the jurisdiction of this state,
appoint the commissioner as its agent for service of process in this state, and agree to provide
security for one hundred percent of the assuming insurer's liabilities attributable to
reinsurance ceded by United States ceding insurers if it resists enforcement of a final United
States judgment.
(e) The assuming insurer shall agree to meet applicable information filing
requirements as determined by the commissioner for its initial application for certification
and for its continual maintenance of certification as a reinsurer.
(f) The assuming insurer shall satisfy any other requirements for certification deemed
relevant by the commissioner.
(2) An association including incorporated and individual unincorporated
underwriters may be a certified reinsurer. To be eligible for certification, in addition to
satisfying requirements of Paragraph (1) of this Subsection:
(a) The association shall satisfy its minimum capital and surplus requirements
through the capital and surplus equivalents and 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.
(b) The incorporated members of the association shall not engage 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 to which the unincorporated members are subject,
pursuant to the authority of the association's domiciliary regulator.
(c) Within ninety days after its 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, the association shall provide
financial statements, prepared by independent public accountants, of each underwriter
member of the association.
(3) The commissioner shall create and publish a list of qualified jurisdictions.
(a) To determine the eligibility of the domiciliary jurisdiction of a non-United States
assuming insurer for recognition as a qualified jurisdiction, the commissioner shall evaluate
the appropriateness and effectiveness of the reinsurance supervisory system of the
jurisdiction, both initially and continually thereafter, 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. A qualified jurisdiction shall agree
to share information and cooperate with the commissioner with respect to all certified
reinsurers domiciled within that jurisdiction. The commissioner may not recognize a
jurisdiction as a qualified jurisdiction if the commissioner determines that it does not
adequately and promptly enforce final United States judgments and arbitration awards. The
commissioner may consider additional factors in determining qualified jurisdictions.
(b) The commissioner shall consider the list of qualified jurisdictions published by
the NAIC through the NAIC committee process 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 in
accordance with criteria to be developed pursuant to regulations.
(c) The commissioner shall recognize as qualified jurisdictions those United States
jurisdictions that meet the requirements for accreditation under the NAIC financial standards
and accreditation program.
(d) If a certified reinsurer's domiciliary jurisdiction ceases to be a qualified
jurisdiction, the commissioner has the discretion to suspend the reinsurer's certification
indefinitely, in lieu of revocation.
(4) The commissioner shall publish a list of all certified reinsurers and their ratings
assigned by the commissioner giving due consideration to the financial strength ratings
assigned by rating agencies acceptable to the commissioner pursuant to regulation.
(5) A certified reinsurer shall secure obligations assumed from United States ceding
insurers under this Subsection at a level consistent with its rating, as specified in regulations
promulgated by the commissioner.
(a) 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 R.S. 22:652, or
in a multi-beneficiary trust in accordance with Subsection D of this Section, except as
otherwise provided in this Subsection.
(b) If a certified reinsurer maintains a trust to fully secure its obligations subject to
Subsection D of this Section, and chooses to secure its obligations incurred as a certified
reinsurer in the form of a multi-beneficiary 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 this
Subsection. It shall be a condition to the grant of certification pursuant to this Subsection
that the certified reinsurer shall have bound itself, by the language of the trust and agreement
with the commissioner with principal regulatory oversight of each such trust account, to
fund, upon termination of any such trust account, out of the remaining surplus of such trust
any deficiency of any other such trust account.
(c) The minimum trusteed surplus requirements provided in Subsection D of this
Section are not applicable with respect to a multi-beneficiary trust maintained by a certified
reinsurer for the purpose of securing obligations incurred pursuant to this Subsection, except
that such trust shall maintain a minimum trusteed surplus of ten million dollars.
(d) With respect to obligations incurred by a certified reinsurer pursuant to this
Subsection, if the security is insufficient, the commissioner shall reduce the allowable credit
by an amount proportionate to the deficiency, and 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.
(e) 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 one
hundred percent of its obligations.
(i) As used in this Subsection, the term "terminated" refers to revocation, suspension,
voluntary surrender, and inactive status.
(ii) If the commissioner continues to assign a higher rating 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.
(6) The commissioner may certify a reinsurer in this state based on the certification
and assigned rating granted to that reinsurer by another NAIC accredited jurisdiction.
(7) A certified reinsurer that ceases to assume new business in this state may request
to maintain its certification in inactive status in order to continue to qualify for a reduction
in security for its in-force business. An inactive certified reinsurer shall continue to comply
with all applicable requirements of this Subsection, and the commissioner shall assign a
rating that takes into account, if relevant, the reasons why the reinsurer is not assuming new
business.
F.(1) The commissioner shall allow credit for reinsurance when the reinsurance is
ceded to an assuming insurer meeting each of the following conditions:
(a)(i) The assuming insurer has its head office or is domiciled in, as applicable, and
is licensed in a reciprocal jurisdiction.
(ii) As used in this Subsection, a "reciprocal jurisdiction" is a jurisdiction that meets
one of the following criteria:
(aa) 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 the Dodd-Frank Wall Street Reform and Consumer Protection Act, 31 U.S.C.
313 and 314, which 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.
(bb) A United States jurisdiction that meets the requirements for accreditation under
the NAIC financial standards and accreditation program.
(cc) A qualified jurisdiction, as determined by the commissioner pursuant to
Paragraph (E)(3) of this Section, which is not otherwise described in Subitem (aa) or (bb) of
this Item and which meets certain additional requirements, consistent with the terms and
conditions of in-force covered agreements, as specified by the commissioner pursuant to
regulation.
(b) The assuming insurer has and maintains, 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 insurer 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 be set forth in regulation.
(c) The assuming insurer has and maintains, on an ongoing basis, a minimum
solvency or capital ratio, as applicable, which will be set forth in regulation. 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.
(d) The assuming insurer agrees and provides adequate assurance to the
commissioner, in a form specified by the commissioner pursuant to regulation, that it will
comply with all of the following:
(i) The assuming insurer shall provide prompt written notice and explanation to the
commissioner if it falls below the minimum requirements set forth in Subparagraph (b) or
(c) of this Paragraph or if any regulatory action is taken against it for serious noncompliance
with applicable law.
(ii) 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 Section limits,
or in any way alters, the capacity of parties to a reinsurance agreement to agree to alternative
dispute resolution mechanisms, except to the extent such agreements are unenforceable under
applicable insolvency or delinquency laws.
(iii) The assuming insurer shall consent in writing to pay any final judgment that has
been declared enforceable in a jurisdiction where the judgment was obtained, wherever
enforcement is sought by a ceding insurer or its legal successor.
(iv) Each reinsurance agreement shall 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 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.
(v) 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 agree to notify
the ceding insurer and the commissioner and to 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 Subsection E of this Section, R.S. 22:652, and as specified by the
commissioner pursuant to regulations.
(e) The assuming insurer or its legal successor provides, if requested by the
commissioner, on behalf of itself and any legal predecessors, certain documentation to the
commissioner, as specified by the commissioner pursuant to regulations.
(f) The assuming insurer maintains a practice of prompt payment of claims under
reinsurance agreements, pursuant to criteria set forth in regulation.
(g) The assuming insurer's supervisory authority confirms to the commissioner on
an annual basis, as of the preceding December thirty-first or at the annual date otherwise
statutorily reported to the reciprocal jurisdiction, that the assuming insurer complies with the
requirements set forth in Subparagraphs (b) and (c) of this Paragraph.
(2) Nothing in this Subsection precludes an assuming insurer from providing the
commissioner with information on a voluntary basis.
(3) The commissioner shall timely create and publish a list of reciprocal
jurisdictions, subject to the following:
(a) A list of reciprocal jurisdictions is published through the NAIC Committee
Process. The commissioner's list shall include any reciprocal jurisdiction as defined pursuant
to Subitems (1)(a)(ii)(aa) and (bb) of this Subsection, 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
developed pursuant to regulations.
(b) 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 regulations, except that the
commissioner shall not remove from the list a reciprocal jurisdiction as defined pursuant to
Subitems (1)(a)(ii)(aa) and (bb) of this Subsection. 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
Section.
(4) The commissioner shall timely create and publish a list of assuming insurers that
have satisfied the conditions set forth in this Subsection and to which cessions shall be
granted credit in accordance with this Subsection. The commissioner may add an assuming
insurer to the list if an NAIC-accredited jurisdiction has added the assuming insurer to a list
of the assuming insurers or if, upon initial eligibility, the assuming insurer submits the
information to the commissioner as required pursuant to Subparagraph (1)(d) of this
Subsection and complies with any additional requirements that the commissioner may
impose by regulation, except to the extent that those requirements conflict with an applicable
covered agreement.
(5) If the commissioner determines that an assuming insurer no longer meets one or
more of the requirements of this Subsection, the commissioner may revoke or suspend the
eligibility of the assuming insurer for recognition under this Subsection in accordance with
procedures set forth in regulations.
(a) 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 R.S. 22:652.
(b) 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 the
provisions of R.S. 22:652.
(6) 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.
(7) Nothing in this Subsection 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 Subpart or other applicable law
or regulation.
(8)(a) Credit may be taken pursuant to this Subsection only for reinsurance
agreements entered into, amended, or renewed on or after the effective date of this
Subsection and only with respect to losses incurred and reserves reported on or after the date
on which the assuming insurer has met all eligibility requirements pursuant to Paragraph (1)
of this Subsection or the effective date of the new reinsurance agreement, amendment, or
renewal, whichever is later.
(b) This Paragraph does not alter or impair a ceding insurer's right to take credit for
reinsurance, to the extent that credit is not available pursuant to this Subsection, as long as
the reinsurance qualifies for credit pursuant to any other applicable provision of this Subpart.
(9) Nothing in this Subsection authorizes an assuming insurer to withdraw or reduce
the security provided under any reinsurance agreement except as permitted by the terms of
the agreement.
(10) Nothing in this Subsection limits, or in any way alters the capacity of parties to
any reinsurance agreement to renegotiate the agreement.
G. Any credit for reinsurance shall also be allowed when the reinsurance is ceded to
an assuming insurer not meeting the requirements of Subsection B, C, D, E, or F of this
Section, but only as to the insurance of risks located in jurisdictions where the reinsurance
is required by applicable law of that jurisdiction.
H. If the assuming insurer is not accredited or certified or does not hold a certificate
of authority to transact insurance or reinsurance in this state, the commissioner shall not
allow the credit permitted by Subsection D of this Section unless each of the following
criteria is met:
(1)(a) The assuming insurer provides the following in all reinsurance agreements:
(i) That 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, comply with all requirements necessary to give such court
jurisdiction, and abide by the final decision of the district court or appellate court.
(ii) To designate the commissioner as its true and lawful attorney, who may be
served any lawful service of process in any action, suit, or proceeding instituted by or on
behalf of the ceding insurer.
(b) The provisions of Items (a)(i) and (ii) of this Paragraph shall not be construed to
conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate
their disputes, if such an obligation is created in the reinsurance agreement.
(2) The assuming insurer files with the commissioner a list identifying its officers
and directors, or similar principals, along with biographical information for each and
provides an annual update of this information.
(3) The assuming insurer agrees to allow the commissioner to examine its books and
records and to waive any protection it has under any secrecy laws of its domiciliary
jurisdiction of the reinsurer, except that any examination shall take place only upon showing
of good cause by the commissioner for concern about the financial soundness or solvency
of the subject entity.
I. The ceding insurer may take credit for the reserves on such ceded risks to the
extent reinsured, except that:
(1) The ceding insurer shall not take credit for such reserves unless the insurer
accepting the reinsurance meets the requirements set forth in this Section as valid assuming
insurers.
(2) The commissioner shall not allow credit to any ceding insurer for reinsurance,
as an admitted asset or as a deduction from liability, unless the reinsurance shall be payable,
in the event of insolvency of the ceding insurer, to its liquidator or receiver on the basis of
the claim or claims allowed against the insolvent ceding insurer by any court of competent
jurisdiction or any justice or judge thereof, or by any receiver or liquidator having authority
to determine and allow such claims, except either where the reinsurance contract with the
consent of the direct insured or insureds specifically provides another payee of such
reinsurance in the event of the insolvency of the ceding insurer, or when the assuming insurer
with the consent of the direct insured or insureds has assumed such policy obligations of the
ceding insurer as direct obligations of the assuming insurer to the payees under such policies
and in substitution for the obligations of the ceding insurer to such payees.
(3) The commissioner shall not permit credit for reinsurance unless the assuming
insurer has been doing business in its country of domicile for at least three years, or is an
affiliate of an insurer or reinsurer that has been doing business in its country of domicile for
at least three years, unless the commissioner, for good cause shown, waives this three-year
operating requirement by rule or regulation.
J. If the assuming insurer does not meet the requirements of Subsection B, C, or F
of this Section, the credit permitted by Subsection D or E of this Section shall not be allowed
unless the assuming insurer agrees in the trust agreements to each of the following
conditions:
(1) Notwithstanding any other provisions in the trust instrument, if the trust fund is
inadequate because it contains an amount less than the amount required by Paragraph (D)(3)
of this Section, or if the grantor of the trust has been declared insolvent or placed into
receivership, rehabilitation, liquidation, or similar proceedings under the laws of its 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 to the commissioner with regulatory oversight all of the assets
of the trust fund.
(2) The commissioner with regulatory oversight, according to the laws relative to the
liquidation of domestic insurance companies of the state in which the trust is domiciled, shall
distribute the assets and shall value claims. Claims shall also be directed to the
commissioner with the regulatory oversight as provided in this Paragraph.
(3) If the commissioner with regulatory oversight determines that the assets of the
trust fund or any part thereof are not necessary to satisfy the claims of the United States
ceding insurers of the grantor of the trust, the assets or part thereof shall be returned by the
commissioner with regulatory oversight to the trustee for distribution in accordance with the
trust agreement.
(4) The grantor shall waive any right otherwise available to it under United States
law that is inconsistent with this provision.
K.(1) If an accredited or certified reinsurer ceases to meet the requirements for
accreditation or certification, the commissioner may suspend or revoke the reinsurer's
accreditation or certification.
(2) The commissioner shall give the reinsurer notice of the suspension or revocation
and opportunity for a hearing in accordance with Chapter 12 of this Title, R.S. 22:2191 et
seq. The suspension or revocation may not take effect until after the commissioner's order
and a hearing unless one of the following circumstances are present:
(a) The reinsurer waives its right to a hearing.
(b) The commissioner's order is based upon regulatory action by the reinsurer's
domiciliary jurisdiction or upon the voluntary surrender or termination of the reinsurer's
eligibility to transact insurance or reinsurance business in its domiciliary jurisdiction or in
the primary certifying state of the reinsurer under Paragraph (E)(6) of this Section.
(c) The commissioner finds that an emergency requires immediate action and a court
of competent jurisdiction has not stayed the commissioner's action.
(3) While a reinsurer's accreditation or certification is suspended, no reinsurance
contract issued or renewed after the effective date of the suspension qualifies for credit
except to the extent that the reinsurer's obligations under the contract are secured in
accordance with R.S. 22:652. If a reinsurer's accreditation or certification is revoked, no
credit for reinsurance may be granted after the effective date of the revocation, except to the
extent that the reinsurer's obligations under the contract are secured in accordance with the
provisions of Paragraph (E)(5) of this Section or in accordance with R.S. 22:652.
L.(1) A 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 days after reinsurance recoverables from any single assuming
insurer, or group of affiliated insurers, exceeds fifty percent of the domestic ceding insurer's
last reported surplus to policyholders, or after it is 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.
(2) A ceding insurer shall take steps to diversify its reinsurance program. A domestic
ceding insurer shall notify the commissioner within thirty days after ceding to any single
assuming insurer, or group of affiliated assuming insurers, more than twenty percent of the
ceding insurer's gross written premium in the prior calendar year, or after it 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.
NOTE: Former R.S. 22:651 redesignated as R.S. 22:879 by Acts 2008, No.
415, §1, eff. Jan. 1, 2009.

Legislative History

Acts 1958, No. 125; Acts 1985, No. 510, §1; Acts 1988, No. 168, §1, eff. Sept. 1, 1988; Acts 1989, No. 560, §1, eff. Sept. 1, 1989; Acts 1990, No. 673, §1; Acts 1991, No. 996, §1, eff. Jan. 1, 1992; Acts 1993, No. 788, §1; Acts 1993, No. 902, §1; Acts 1995, No. 1182, §1; Redesignated from R.S. 22:941 by Acts 2008, No. 415, §1, eff. Jan. 1, 2009; Acts 2009, No. 503, §1; Acts 2012, No. 419, §1; Acts 2016, No. 199, §1; Acts 2020, No. 179, §1; Acts 2022, No. 185, §1.