§ 1308 — Reinsurance, when permitted; effect on reserves

New York § 1308

• Jurisdiction: New York
• Law ISC: Insurance
• Art. 13: Assets and Deposits

Text

§ 1308. Reinsurance, when permitted; effect on reserves. (a) (1) Any\nauthorized insurer, hereinafter called the "ceding insurer", may,\nsubject to the limitations of this chapter, reinsure its risks and\npolicy liabilities in any other assuming insurer with the effects herein\nprescribed. No prohibition or limitation in this chapter shall\ninvalidate any reinsurance agreement as between the parties thereto.\n (2) (A) No credit shall be allowed, as an admitted asset or deduction\nfrom liability, to any ceding insurer for reinsurance ceded, renewed, or\notherwise becoming effective after January first, nineteen hundred\nforty, unless:\n (i) the reinsurance shall be payable by the assuming insurer on the\nbasis of the liability of the ceding insurer under the contracts\nreinsured without diminution because of the insolvency of the ceding\ninsurer, and\n (ii) under the reinsurance agreement the liability for such\nreinsurance is assumed by the assuming insurer as of the same effective\ndate.\n (B) Except as provided by subsection (a) of section four thousand one\nhundred eighteen of this chapter, no such credit shall be allowed any\nceding insurer for reinsurance ceded, renewed, or otherwise becoming\neffective after September first, nineteen hundred fifty-two, unless the\nreinsurance agreement provides that payments by the assuming insurer\nshall be made directly to the ceding insurer or its liquidator, receiver\nor statutory successor, except where:\n (i) the agreement specifies another payee of such reinsurance in the\nevent of the insolvency of the ceding insurer, or\n (ii) the assuming insurer with the consent of the direct insureds has\nassumed such policy obligations of the ceding insurer as its direct\nobligations to the payees under such policies, in substitution for the\nobligations of the ceding insurer to such payees.\n (3) Such reinsurance agreement may provide that the liquidator,\nreceiver or statutory successor of an insolvent ceding insurer shall\ngive written notice of the pendency of a claim against such insurer on\nthe contract reinsured within a reasonable time after such claim is\nfiled in the insolvency proceeding and that during the pendency of such\nclaim any assuming insurer may investigate such claim and interpose, at\nits own expense, in the proceeding where such claim is to be adjudicated\nany defenses which it deems available to the ceding company, its\nliquidator, receiver or statutory successor. Such expense shall be\nchargeable subject to court approval against the insolvent ceding\ninsurer as part of the expense of liquidation to the extent of a\nproportionate share of the benefit which may accrue to the ceding\ninsurer solely as a result of the defense undertaken by the assuming\ninsurer. Where two or more assuming insurers are involved in the same\nclaim and a majority in interest elect to interpose defense to such\nclaim, the expense shall be apportioned in accordance with the terms of\nthe reinsurance agreement as though such expense had been incurred by\nthe ceding company.\n (b) In determining the ceding insurer's financial condition, if\nreinsurance is effected by the ceding insurer in any assuming insurer,\nthe ceding insurer shall, in addition to any credit allowed against its\nloss reserves, and any reduction of reserves allowed pursuant to\nparagraph nine of subsection (a) of section one thousand three hundred\none of this article for reinsurance recoverable from insurers not\nauthorized in this state, receive credit for reinsurance effected with\nany assuming insurer authorized to do such business in this state,\ncalculated as follows:\n (1) as to reinsurance of all or any part of any risk not specified in\nparagraph two hereof, by way of deduction from its unearned premium\nliability calculated in accordance with the provisions of section one\nthousand three hundred five of this article; or\n (2) as to reinsurance of all or any part of any life insurance or\nannuity or non-cancellable disability risk, by way of deduction from its\nreserve liability, in an amount not exceeding the reserve on the\nreinsured portion of such risk which the ceding insurer would have\nmaintained if such portion had not been reinsured.\n (c) Nothing in this section shall be deemed to permit the ceding\ninsurer to receive through the cession of all or any part of any risk\nany advantage whereby its unearned premium reserve, or the net amount of\nits valuation reserves, is reduced below the amount required by this\nchapter.\n (d) In determining its financial condition, any assuming insurer shall\nbe charged:\n (1) in its unearned premium liability with an amount equal to the\ndeduction specified in paragraph one of subsection (b) hereof, and\n (2) in its valuation reserve liability with an amount at least equal\nto the amount which it would be required to maintain in accordance with\nthe provisions of this chapter if it were the direct insurer of such\nassumed risks on the basis specified in the reinsurance agreement.\n (e) (1) During any period of twelve consecutive months, without the\nsuperintendent's permission:\n (A) no domestic insurer, except life, shall by any reinsurance\nagreement or agreements cede an amount of its insurance on which the\ntotal gross reinsurance premiums are more than fifty percent of the\nunearned premiums on the net amount of its insurance in force at the\nbeginning of such period, and\n (B) no alien insurer, except life, shall by any reinsurance agreement\nor agreements, involving the withdrawal or transfer of any interest in\nany of its trusteed assets in the United States, cede an amount of its\ninsurance on which the total gross reinsurance premiums are more than\nfifty percent of the unearned premiums on the net amount of its\ninsurance in force in the United States, at the beginning of such\nperiod.\n (2) Paragraph one hereof shall not apply to reinsurance made in the\nordinary course of business reinsuring specified individual risks under\nreinsurance agreements relating to current business.\n (3) If any agreement or agreements at any time effect reinsurance of\nsubstantially all of the net insurance in force of such ceding insurer,\nno credit by way of deduction pursuant to subsection (b) hereof shall be\nallowed to such ceding insurer, unless either:\n (A) the assuming insurer or insurers assume or have assumed the policy\nobligations of the ceding insurer as their direct obligations to the\nobligees under such policies and the provisions for cancellation, if\nany, of such reinsurance agreements have been approved by the\nsuperintendent, or\n (B) such reinsurance agreement or agreements were made under pooling\narrangements between insurers associated in a group for underwriting\npurposes and were approved by the superintendent as not impairing the\nprotection of policyholders of such ceding or assuming insurers.\n (f) (1) Unless the superintendent permits:\n (A) No domestic life insurance company shall (i) reinsure its whole\nrisk on any individual life or joint lives, or (ii) reinsure a\nsubstantial portion of its life insurance in force.\n (B) No foreign or alien insurer shall reinsure its whole risk on any\nindividual life or joint lives, written under a policy or contract\ndelivered or issued for delivery in this state.\n (2) Any domestic life insurance company proposing to assume by\nreinsurance all or any part of the business in force, other than\nportions of individual risks, of any domestic, foreign or alien life\ninsurance company, fraternal benefit society or other organization\nhaving outstanding policies or certificates of life insurance or\naccident and health insurance or annuity contracts shall make written\napplication to the superintendent for permission to do so. If after due\nconsideration the superintendent is satisfied that the proposed\nreinsurance will not prejudice the interests of the policyholders of\neither the applicant or the companies that are members of The Life\nInsurance Guaranty Corporation or of The Life and Health Insurance\nCompany Guaranty Corporation of New York, the superintendent shall grant\nthe permission.\n (3) The superintendent, after notice to and an opportunity to be heard\nby all domestic life insurance companies, may issue and from time to\ntime amend regulations establishing standards which tend to promote\norderly growth and financial stability among the companies and otherwise\neffectuate the purposes of this subsection.\n (g) Any domestic life insurance company which has discontinued doing\nany new business in a foreign country may, with the permission of the\nsuperintendent, reinsure all or any part of its risks outstanding in\nsuch country in any solvent insurer authorized to transact business\ntherein. Thereafter such life insurance company shall not be required to\ncharge as liabilities the reserves and other liabilities pertaining to\nthe reinsured risks.\n