§ 6507 — Reinsurance

§ 6507. Reinsurance. (a) A mortgage insurer may, by contract, reinsure\nany insurance it transacts and receive credit for such reinsurance as an\nasset or as a reduction from liabilities, including its contingency\nreserve liability, in its financial statements where such reinsurance is\nplaced with another mortgage insurer licensed under this article.\n (b) Notwithstanding any provision of law to the contrary, mortgage\nguaranty insurance may, by contract, be reinsured, provided that any\nreinsurance arrangements entered into by a mortgage insurer and an\nassuming insurer comply with the provisions of this article. The\nunearned premium reserve required by section one thousand three hundred\nfive of this chapter, the contingency reserve required by paragraph two\nof subsection (a) of section six thousand five hundred two of this\narticle and loss reserve required by paragraph three of subsection (a)\nof section six thousand five hundred two of this article shall be\nestablished and maintained by the mortgage insurer or by the assuming\ninsurer so that the aggregate reserves shall not be less than the\nreserves required by such subsection.\n (c) Where a mortgage insurer cedes any insurance to an insurer that\ninsures or reinsures other lines of insurance in addition to mortgage\nguaranty insurance, the amount of insurance so ceded shall not exceed\nthirty-five percent of the total exposure insured by the mortgage\ninsurer after deducting insurance ceded to any other mortgage insurer.\n (d) Where a mortgage insurer cedes any insurance to a mortgage insurer\nnot licensed under this article or an insurer that insures or reinsures\nother lines of insurance in addition to mortgage guaranty insurance, in\norder for the mortgage insurer to receive credit for such reinsurance as\nan asset or as a reduction from liabilities, including its contingency\nreserve liability, in its financial statements, such assuming insurer\nmust maintain a surplus to policyholders of at least thirty-five million\ndollars and the following must occur;\n (1) the insurer must establish and maintain in a segregated trust an\namount equal to the greater of either the contingency reserve required\nby paragraph two of subsection (a) of section six thousand five hundred\ntwo of this article, or four percent of the outstanding total liability\nunder the aggregate insurance policies assumed from the mortgage\ninsurer;\n (2) the insurer must establish and maintain in a segregated trust, or\nprovide a letter of credit in a form approved by the superintendent, an\namount equal to the unearned premium and loss reserves;\n (3) any such aggregated trust shall be funded by assets permitted by\narticle fourteen of this chapter for the loss reserve required by\nparagraph three of subsection (a) of section six thousand five hundred\ntwo of this article and for the unearned premium reserve required by\nsection one thousand three hundred five of this chapter, and shall be\nfunded by either the types of assets specified in paragraphs one, two\nand three of subsection (b) of section one thousand four hundred two and\nparagraphs one, two and twelve of subsection (a) of section one thousand\nfour hundred four of this chapter or by tax and loss bonds purchased\npursuant to § 832(e) of the Internal Revenue Code for the greater of the\namount of reserves required by paragraph two of subsection (a) of\nsection six thousand five hundred two of this article or paragraph one\nof subsection (b) of section six thousand five hundred two of this\narticle;\n (4) the reinsurance agreement must be submitted to the commissioner or\nsuperintendent of insurance of the mortgage insurer's domicile for\napproval; and\n (5) the reinsurance agreement must provide that:\n (A) it is not valid until approved by the commissioner or\nsuperintendent of insurance of the mortgage insurer's domicile;\n (B) any amendments to the reinsurance agreement must be submitted to\nthe commissioner or superintendent of insurance of the mortgage\ninsurer's domicile for approval prior to becoming effective;\n (C) the ceding mortgage insurer has a right to terminate the ceding of\nadditional insurance under the reinsurance agreement if so ordered by\nthe superintendent;\n (D) the superintendent has the right to request from the assuming\nreinsurer information concerning its financial condition;\n (E) the assuming reinsurer shall notify the superintendent of any\nmaterial change in its financial condition; and\n (F) such agreements and any amendments thereto shall be provided to\nthe superintendent, who shall have the right to disapprove of any\nagreement. Such agreements and any amendments thereto shall be deemed\napproved by the superintendent unless disapproved within thirty days\nfrom the date provided to the superintendent. If the superintendent\ndisapproves of any reinsurance agreement or amendments thereto the\nmortgage insurer shall not receive credit for such reinsurance as an\nasset or as a reduction from liabilities in its financial statement.\n (e) Nothing contained herein shall be deemed to permit an insurer that\ninsures or reinsures other lines of insurance in addition to mortgage\nguaranty insurance to write directly mortgage guaranty insurance.\n (f) Any reinsurance agreement that was valid under this chapter at the\ntime entered into shall not be invalidated by this section.\n