§ 6906 — Reinsurance

§ 6906. Reinsurance. (a) For financial guaranty insurance that takes\neffect on or after the effective date of this article, an insurer\nauthorized to transact financial guaranty insurance shall receive credit\nfor reinsurance, in accordance with the provisions of this chapter\napplicable to property/casualty insurers, as an asset or as a reduction\nfrom liabilities provided that such reinsurance is subject to an\nagreement that, for its stated term and with respect to any such\nreinsured financial guaranty insurance in force, the reinsurance\nagreement (facultative or treaty) may only be terminated or amended (i)\nat the option of the reinsurer or the ceding insurer, if the reinsurance\nagreement provides that the liability of the reinsurer with respect to\npolicies in effect at the date of termination shall continue until the\nexpiration or cancellation of each such policy, or (ii) with the consent\nof the ceding company, if the reinsurance agreement provides for a\ncutoff of the reinsurance in force at the date of termination, or (iii)\nat the discretion of the superintendent acting as rehabilitator,\nliquidator or receiver of the ceding or assuming insurer; and provided\nthat such reinsurance is:\n (1) placed with a financial guaranty insurance corporation licensed\nunder this article or an insurer writing only financial guaranty\ninsurance as is or would be permitted by this article; or\n (2) placed with a property/casualty insurer or an accredited reinsurer\nlicensed or accredited to reinsure risks of every kind or description\n(including municipal obligation bonds), as set forth in subsection (c)\nof section four thousand one hundred two of this chapter, if the\nreinsurance agreement with such insurer requires that such insurer:\n (A) have and maintain surplus to policyholders of at least thirty-five\nmillion dollars;\n (B) establish and maintain the reserves required in section six\nthousand nine hundred three of this article, except that if the\nreinsurance agreement is not pro rata the contribution to the\ncontingency reserve shall be equal to fifty percent of the quarterly\nearned reinsurance premium. However, the assuming insurer need not\nestablish and maintain such reserve to the extent that the ceding\ninsurer has established and continues to maintain such reserve;\n (C) comply with the provisions of subsection (c) of section six\nthousand nine hundred four of this article, except that the maximum\ntotal exposures reinsured net of retrocessions and collateral shall be\none-half of that permitted for a financial guaranty insurance\ncorporation;\n (D) if a parent of the insurer, another subsidiary of the parent of\nthe insurer, or a subsidiary of the insurer, then the aggregate of all\nrisks assumed by such reinsurers shall not exceed ten percent of the\ninsurer's exposures, net of retrocessions and collateral. Direct or\nindirect ownership interests of fifty percent or more shall be deemed a\nparent/subsidiary relationship;\n (E) if an affiliate of the insurer, such affiliate shall not assume a\npercentage of the insurer's total exposures insured net of retrocessions\nand collateral in excess of its percentage of equity interest in the\ninsurer; and\n (F) assumes from the financial guaranty insurer and any affiliate,\nparent of the insurer, another subsidiary of the parent of the insurer,\nor subsidiary of the insurer that is a financial guaranty insurance\ncorporation or an insurer writing only financial guaranty insurance as\nis or would be permitted by this article and such other kinds of\ninsurance that a financial guaranty insurance corporation may write in\nthis state, together with all other reinsurers subject to this\nparagraph, less than fifty percent of the total exposures insured by the\nfinancial guaranty insurer and such affiliates, parents or subsidiaries\nof the insurer, net of collateral, remaining after deducting any\nreinsurance placed with another financial guaranty insurance corporation\nthat is not an affiliate, a parent of the financial guaranty insurer,\nanother subsidiary of the parent of the insurer, or a subsidiary of the\ninsurer or a financial guaranty insurer writing only financial guaranty\ninsurance as is or would be permitted by this article that is not an\naffiliate, a parent of the financial guaranty insurer, another\nsubsidiary of the parent of the insurer, or a subsidiary of the insurer;\nor\n (3) if placed with an unauthorized or unaccredited reinsurer which\notherwise meets the requirements of either the opening paragraph of this\nsubsection and paragraph one of this subsection, or the opening\nparagraph of this subsection and subparagraphs (A), (D), (E) and (F) of\nparagraph two of this subsection, in an amount not exceeding the\nliabilities carried by the ceding insurer for amounts withheld under a\nreinsurance treaty with such reinsurer or amounts deposited by such\nreinsurer as security for the payment of obligations under the treaty if\nsuch funds or deposit are held subject to withdrawal by, and under the\ncontrol of, the ceding insurer.\n (b) In determining whether the insurer meets the aggregate risk\nlimitations, in addition to credit for other types of qualifying\nreinsurance, the insurer's aggregate risk may be reduced to the extent\nof the limit for aggregate excess reinsurance, but in no event in an\namount greater than the amount of the aggregate risks which will become\ndue during the unexpired term of such reinsurance agreement in excess of\nthe insurer's retention pursuant to such reinsurance agreement.\n