§36-5122. Requirements for allowance of credit.
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A. Credit for reinsurance shall be allowed a domestic ceding insurer as either an asset or a reduction from liability on account of reinsurance ceded only when the reinsurer meets the requirements of subsection B, C, D, E, F, G or H of this section; provided, further, that the Commissioner may adopt by regulation pursuant to subsection B of Section 5124 of this title, 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 subsection B of Section 5124 of this title and the circumstances pursuant to which credit will be reduced or eliminated.
Credit shall be allowed under subsection B, C or D of this section only as respects cessions of those kinds or classes of business in which 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. Credit shall be allowed under subsection D or E of this section only if the applicable requirements of subsection I have been satisfied.
B. Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is licensed to transact insurance or reinsurance in this state.
C. Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is accredited by the Insurance Commissioner as a reinsurer in this state. An accredited reinsurer is one that:
1. Files with the Insurance Commissioner evidence of its submission to this state's jurisdiction;
2. Submits to this state's authority to examine its books and records;
3. Is licensed to transact insurance or reinsurance in at least one state, or in the case of a United States branch of an alien assuming insurer is entered through and licensed to transact insurance or reinsurance in at least one state;
4. Files annually with the Insurance Commissioner a copy of its annual statement filed with the insurance department of its state of domicile and a copy of its most recent audited financial statement; and
5. Demonstrates to the satisfaction of the Insurance Commissioner that it has adequate financial capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from domestic insurers. An assuming insurer is deemed to meet 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 ($20,000,000.00) and its accreditation has not been denied by the Insurance Commissioner within ninety
(90)days after submission of its application.
D. Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is domiciled in, or in the case of a United States branch of an alien assuming insurer is entered through, a state that employs standards regarding credit for reinsurance substantially similar to those applicable under this statute and the assuming insurer or United States branch of an alien assuming insurer:
1. Maintains a surplus as regards policyholders in an amount not less than Twenty Million Dollars ($20,000,000.00); and
2. Submits to the authority of this state to examine its books and records.
The requirement of paragraph 1 of this subsection does not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system.
E. 1. Credit shall be allowed when the reinsurance is ceded to an assuming insurer that maintains a trust fund in a qualified United States financial institution, as defined in Section 5123.1 of this title, for the payment of the valid claims of its United States ceding insurers, their assigns and successors in interest. To enable the Insurance Commissioner to determine the sufficiency of the trust fund, the assuming insurer shall report annually to the Insurance Commissioner information substantially the same as that required to be reported on the National Association of Insurance Commissioners Annual Statement form by licensed insurers.
The assuming insurer shall submit to examination of its books and records by the Commissioner and bear the expense of examination.
2. Credit for reinsurance shall not be granted under this subsection unless the form of the trust and any amendments to the trust have been approved by:
a. the Commissioner of the state where the trust is
domiciled, or
b. the Commissioner of another state who, pursuant to the
terms of the trust instrument, has accepted principal
regulatory oversight of the trust.
3. The form of the trust and any trust amendments also shall be filed with the Insurance Commissioner of every state in which the ceding insurer beneficiaries of the trust are domiciled. 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 Insurance Commissioner.
4. 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.
5. No later than February 28 of each year the trustee of the trust shall report to the Insurance Commissioner in writing the balance of the trust and listing 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 shall not expire prior to the following December 31.
6. The following requirements apply to the following categories of assuming insurer:
a. the trust fund for a single assuming insurer shall
consist of funds in trust in an amount not less than
the assuming insurer's liabilities attributable to
reinsurance ceded by United States ceding insurers,
and, in addition, the assuming insurer shall maintain
a trusteed surplus of not less than Twenty Million
Dollars ($20,000,000.00), 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
(3)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 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 flows, 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 shall
not be reduced to an amount less than thirty percent
(30%) of the assuming insurer's liabilities
attributable to reinsurance ceded by United States
ceding insurers covered by the trust,
c.
(1)in the case of a group including incorporated and
individual unincorporated underwriters:
(a)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,
(b)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 the Credit for
Reinsurance Act, 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, and
(c)in addition to these trusts, the group shall
maintain in trust a trusteed surplus of
which One Hundred Million Dollars
($100,000,000.00) shall be held jointly for
the benefit of the United States-domiciled
ceding insurers of any member of the group
for all years of account,
(2)the incorporated members of the group shall not
be engaged 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, and
(3)within ninety
(90)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, and
d. in the case of a group of incorporated underwriters
under common administration, the group shall:
(1)have continuously transacted an insurance
business outside the United States for at least
three
(3)years immediately prior to making
application for accreditation,
(2)maintain aggregate policyholders' surplus of at
least Ten Billion Dollars ($10,000,000,000.00),
(3)maintain a trust fund in an amount not less than
the group's several liabilities attributable to
business ceded by United States-domiciled ceding
insurers to any member of the group pursuant to
reinsurance contracts issued in the name of the
group,
(4)in addition, maintain a joint trusteed surplus of
which One Hundred Million Dollars
($100,000,000.00) shall be held jointly for the
benefit of United States-domiciled ceding
insurers of any member of the group as additional
security for these liabilities, and
(5)within ninety
(90)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 each
underwriter member's solvency by the member's
domiciliary regulator and financial statements of
each underwriter member of the group prepared by
its independent public accountant.
F. Credit shall be allowed when the reinsurance is ceded to an assuming insurer that has been certified by the Commissioner as a reinsurer in this state and secures its obligations in accordance with the requirements of this subsection.
1. In order 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 to be
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
(100%) 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, both with respect to an initial
application for certification and on an ongoing basis,
and
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. In order 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 (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
be engaged 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 by
the association's domiciliary regulator as are the
unincorporated members, and
c. within ninety
(90)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, 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 under which an assuming insurer licensed and domiciled in such jurisdiction is eligible to be considered for certification by the Commissioner as a certified reinsurer.
a.
In order to determine whether the domiciliary
jurisdiction of a non-United-States assuming insurer
is eligible to be recognized as a qualified
jurisdiction, the Commissioner shall evaluate the
appropriateness and effectiveness of the reinsurance
supervisory system of the jurisdiction, both initially
and on an ongoing basis, 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. A jurisdiction shall not be
recognized as a qualified jurisdiction if the
Commissioner has determined that the jurisdiction does
not adequately and promptly enforce final United
States judgments and arbitration awards. Additional
factors may be considered in the discretion of the
Commissioner.
b. A list of qualified jurisdictions shall be published
through the National Association of Insurance
Commissioners
(NAIC)Committee Process. The
Commissioner shall consider this list 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 under
regulations.
c. United States jurisdictions that meet the requirement
for accreditation under the NAIC financial standards
and accreditation program shall be recognized as
qualified jurisdictions.
d. If a certified reinsurer's domiciliary jurisdiction
ceases to be a qualified jurisdiction, the
Commissioner may at his or her discretion suspend the
reinsurer's certification indefinitely, in lieu of
revocation.
4. The Commissioner shall assign a rating to each certified reinsurer, giving due consideration to the financial strength ratings that have been assigned by rating agencies deemed acceptable to the Commissioner pursuant to regulation. The Commissioner shall publish a list of all certified reinsurers and their ratings.
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. In order 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
Section 5123 of this title, or in a multibeneficiary
trust in accordance with subsection E 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 E of this
section, and chooses to secure its obligations
incurred as a certified reinsurer in the form of a
multibeneficiary 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 subsection E of this section.
It shall be a condition to the grant of certification
under 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 E of this section are not applicable with
respect to a multibeneficiary trust maintained by a
certified reinsurer for the purpose of securing
obligations incurred under this subsection, except
that such trust shall maintain a minimum trusteed
surplus of Ten Million Dollars ($10,000,000.00).
d. With respect to obligations incurred by a certified
reinsurer under this subsection, if the security is
insufficient, the Commissioner shall reduce the
allowable credit by an amount proportionate to the
deficiency, and may at his or her discretion 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.
6. If an applicant for certification has been certified as a reinsurer in an NAIC-accredited jurisdiction, the Commissioner may
at his or her discretion defer to that jurisdiction's certification, and may in his or her discretion defer to the rating assigned by that jurisdiction, and such assuming insurer shall be considered to be a certified reinsurer in this state.
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.
8. For purposes of this subsection:
a. a certified reinsurer whose certification has been
terminated for any reason shall be treated as a
certified reinsurer required to secure one hundred
percent (100%) of its obligations, and
b. the term "terminated" refers to revocation,
suspension, voluntary surrender and inactive status.
If the Commissioner continues to assign a higher
rating as permitted by this section, the requirement
to secure one hundred percent (100%) of its
obligations shall not apply to a certified reinsurer
in inactive status or to a reinsurer whose
certification has been suspended.
G. 1. Credit shall be allowed when the reinsurance is ceded to an assuming insurer meeting all of the following conditions:
a. the assuming insurer shall have its head office or be
domiciled, as applicable, and licensed in a reciprocal
jurisdiction. For purposes of this subparagraph,
"reciprocal jurisdiction" is a jurisdiction that is
one of the following:
(1)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 subparagraph, a "covered agreement" is an
agreement entered into pursuant to Dodd-Frank
Wall Street Reform and Consumer Protection Act,
31 U.S.C. Sections 313 and 314, that 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,
(2)a United States jurisdiction that meets the
requirements for accreditation under the National
Association of Insurance Commissioners financial
standards and accreditation program, or
(3)a qualified jurisdiction, as determined by the
Commissioner pursuant to paragraph 3 of
subsection F of this section, that is not
otherwise described in division 1 or 2 of
subparagraph a of paragraph 1 of this subsection
and meets additional requirements consistent with
the terms and conditions of in-force, covered
agreements, as specified by the Commissioner in
rules,
b. the assuming insurer shall have and maintain, 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 Insurance Department rules. 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
Department rules,
c. the assuming insurer shall have and maintain, on an
ongoing basis, a minimum solvency or capital ratio, as
applicable, which will be set forth in Department
rules. 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 and is also
licensed,
d. the assuming insurer shall agree and provide adequate
assurance to the Insurance Commissioner, in a form
specified by the Commissioner, as follows:
(1)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,
(2)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 provision
shall be construed to limit, or in any way alter,
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,
(3)the assuming insurer shall consent in writing to
pay all final judgments, wherever enforcement is
sought, obtained by a ceding insurer or its legal
successor, that have been declared enforceable in
the jurisdiction where the judgment was obtained,
(4)each reinsurance agreement shall include a
provision requiring the assuming insurer to
provide security in an amount equal to one
hundred percent (100%) of the liabilities of the
assuming insurer 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, and
(5)the assuming insurer shall confirm that it is not
presently participating in any solvent scheme of
arrangement that involves the ceding insurers of
this state, and agree to notify the ceding
insurer and the Commissioner and to provide
security in an amount equal to one hundred
percent (100%) of the liabilities of the assuming
insurer to the ceding insurer, should the
assuming insurer enter into such a solvent scheme
of arrangement. The security shall be in a form
consistent with the provisions of subsection F of
Section 5122 and Section 5123 of this title,
specified by the Commissioner in rule,
e. the assuming insurer or its legal successor shall
provide, on behalf of itself and any legal
predecessors, any additional documentation requested
by the Commissioner in regulation,
f.
the assuming insurer shall maintain a practice of
prompt payment of claims under reinsurance agreements,
pursuant to criteria set forth in rule,
g. the supervisory authority of the assuming insurer
shall confirm to the Commissioner on an annual basis,
as of the preceding December 31 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, and
h. nothing in this provision shall be construed to
preclude an assuming insurer from providing the
Commissioner with information on a voluntary basis.
2. The Commissioner shall timely create and publish a list of reciprocal jurisdictions.
a. A list of reciprocal jurisdictions is published
through the National Association of Insurance
Commissioners Committee Process. The list shall
include any reciprocal jurisdiction as defined under
subparagraph a of paragraph 1 of this subsection and
shall consider any other reciprocal jurisdiction
included on the National Association of Insurance
Commissioners list. The Commissioner may approve a
jurisdiction that does not appear on the list of
reciprocal jurisdictions in accordance with criteria
to be developed through rules issued by the
Commissioner.
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 rules issued by the Commissioner,
except that the Commissioner shall not remove from the
list a reciprocal jurisdiction as defined under
subparagraph a of paragraph 1 of this subsection.
Upon removal of a reciprocal jurisdiction from this
list, credit for reinsurance ceded to an assuming
insurer that has its home office or is domiciled in
that jurisdiction shall be allowed, if otherwise
allowed pursuant to this act.
3. 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 such list if a National Association of Insurance Commissioners accredited jurisdiction has added the assuming insurer to a list of such assuming insurers or if, upon initial eligibility,
the assuming insurer submits the information to the Commissioner as required under subparagraph d of paragraph 1 of this subsection and complies with any additional requirements that the Commissioner may impose by regulation, except to the extent that they conflict with an applicable covered agreement.
4. If the Commissioner determines that an assuming insurer no longer meets one or more of the requirements under 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 Department rules.
a. While the eligibility of an assuming insurer 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
obligations of the assuming insurer under the contract
are secured in accordance with the provisions of
Section 5123 of this title.
b. If the eligibility of an assuming insurer 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 obligations of the assuming insurer under the
contract are secured in a form acceptable to the
Commissioner.
5. 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.
6. Nothing in this subsection shall be construed to 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 act or other applicable law or rule.
7. Credit may be taken under this subsection only for reinsurance agreements entered into, amended or renewed on or after the effective date of this act, and only with respect to losses incurred and reserves reported on or after the later of
(1)the date on which the assuming insurer has met all eligibility requirements pursuant to paragraph 1 of this subsection, and
(2)the effective date of the new reinsurance agreement, amendment or renewal.
a. This paragraph does not alter or impair the right of a
ceding insurer to take credit for reinsurance, to the
extent that credit is not available under this
subsection, as long as the reinsurance qualifies for
credit under any other applicable provision of this
act.
b. Nothing in this subsection shall be construed to
authorize an assuming insurer to withdraw or reduce
the security provided under any reinsurance agreement,
except as permitted by the terms of the agreement.
c. Nothing in this subsection shall be construed to
limit, or in any way alter, the capacity of parties to
any reinsurance agreement to renegotiate the
agreement.
H. Credit shall be allowed when the reinsurance is ceded to an assuming insurer not meeting the requirements of subsection B, C, D, E, F or G of this section but only as the insurance of risks located in jurisdictions where the reinsurance is required by applicable law or regulation of that jurisdiction.
I. If the assuming insurer is not licensed, accredited or certified to transact insurance or reinsurance in this state, the credit permitted by subsections D and E of this section shall not be allowed unless the assuming insurer agrees in the reinsurance agreements:
1. 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, will comply with all requirements necessary to give the court jurisdiction, and will abide by the final decision of the court or of any appellate court in the event of an appeal; and
2. To designate the Insurance Commissioner or a designated attorney as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the ceding insurer. This subsection is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if this obligation is created in the agreement.
J. If the assuming insurer does not meet the requirements of subsection B, C, D, or G of this section, the credit permitted by subsection E or F of this section shall not be allowed unless the assuming insurer agrees in the trust agreements to 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 6 of subsection E 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 assets shall be distributed by and claims shall be filed with and valued by the Commissioner with regulatory oversight in accordance with the laws of the state in which the trust is domiciled that are applicable to the liquidation of domestic insurance companies;
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; and
4. The grantor shall waive any right otherwise available to it under United States law that is inconsistent with this provision.
K. 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.
1. The Commissioner shall give the reinsurer notice and opportunity for hearing. The suspension or revocation shall not take effect until after the Commissioner's order on hearing, unless:
a. the reinsurer waives its right to hearing,
b. the Commissioner's order is based on regulatory action
by the reinsurer's domiciliary jurisdiction or 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 6 of subsection F of this section, or
c. the Commissioner finds that an emergency requires
immediate action and a court of competent jurisdiction
has not stayed the Commissioner's action.
2. 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 Section 5123 of this title. If a reinsurer's accreditation or certification is revoked, no credit for reinsurance shall 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 paragraph 5 of subsection F of this section or Section 5123 of this title.
L. Concentration Risk.
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
(30)days after reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, exceeds fifty percent (50%) 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
(30)days after ceding to any single assuming insurer, or group of affiliated assuming insurers, more than twenty percent (20%) 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. Added by Laws 1992, c. 178, § 36, eff. Sept. 1, 1992. Amended by Laws 1994, c. 86, § 1, eff. Sept. 1, 1994; Laws 1997, c. 418, § 99, eff. Nov. 1, 1997; Laws 2000, c. 169, § 2, eff. Nov. 1, 2000; Laws 2016, c. 298, § 1, eff. Nov. 1, 2016; Laws 2021, c. 47, § 1, eff. Nov. 1, 2021; Laws 2022, c. 154, § 5, eff. Nov. 1, 2022.