§ 26.1-02-21 — Reinsurance - Treatment upon insolvency, liquidation, or dissolution

North Dakota § 26.1-02-21

• Jurisdiction: North Dakota
• Title 26.1: Insurance
• Ch. 26.1-02: General Provisions

Text

1. Credit may not be allowed, as an admitted asset or as a deduction from liability, to any
ceding insurer for reinsurance unless the reinsurance contract provides, in substance,
that in the event of the insolvency of the ceding insurer, the reinsurance must be
payable under one or more contracts reinsured by the assuming insurer on the basis
of reported claims allowed by the liquidation court or proof of payment of the claim by
a guaranty association without diminution because of the insolvency of the ceding
insurer. The payments must be made directly to the ceding insurer or to the ceding
insurer's domiciliary liquidator except if:
a. The contract or other written agreement specifically provides another payee of
such reinsurance in the event of the insolvency of the ceding insurer; or

b. The assuming insurer, with the consent of the direct insured, has assumed such
policy obligations of the ceding insurer as direct obligations of the assuming
insurer to the payees under the policies and in substitution for the obligations of
the ceding insurer to the payees.
2. Notwithstanding subsection 1, if a life and health insurance guaranty association has
elected to succeed to the rights and obligations of the insolvent insurer under the
contract of reinsurance, the reinsurer's liability to pay covered reinsured claims
continues under the contract of reinsurance, subject to the payment to the reinsurer of
the reinsurance premiums for such coverage. Payment for such reinsured claims may
only be made by the reinsurer pursuant to the direction of the guaranty association or
the guaranty association's designated successor. Any payment made at the direction
of the guaranty association or the guaranty association's designated successor by the
reinsurer will discharge the reinsurer of all further liability to any other party for the
claim payment.
3. The reinsurance agreement may provide that the domiciliary liquidator of an insolvent
ceding insurer shall give written notice to the assuming insurer of the pendency of a
claim against such ceding insurer on the contract reinsured within a reasonable time
after the claim is filed in the liquidation proceeding. During the pendency of the claim,
any assuming insurer may investigate the claim and interpose, at the assuming
insurer's own expense, in the proceeding in which the claim is to be adjudicated any
defenses the assuming insurer determines available to the ceding insurer, or the
ceding insurer's liquidator. The expense may be filed as a claim against the insolvent
ceding insurer as a class 7 claim under section 26.1-06.1-41 to the extent of a
proportionate share of the benefit which may accrue to the ceding insurer solely as a
result of the defense undertaken by the assuming insurer. If two or more assuming
insurers are involved in the same claim and a majority in interest elect to interpose one
or more defenses to the claim, the expense must be apportioned in accordance with
the terms of the reinsurance agreement as though the expense had been incurred by
the ceding insurer.