Chapter 091
2013 -- S 0667 SUBSTITUTE A
Enacted 06/17/13
A N A C T
RELATING TO
INSURANCE
Introduced By: Senators Picard, and Walaska
Date Introduced: March 06, 2013
It is enacted by the
General Assembly as follows:
SECTION 1. Section 27-1.1-1 of the General Laws in Chapter
27-1.1 entitled "Credit for
Reinsurance Act" is
hereby amended to read as follows:
27-1.1-1. Credit
allowed a domestic ceding insurer. -- (a) Credit for reinsurance shall
be allowed a domestic ceding insurer as either an
asset or a deduction reduction from liability on
account of reinsurance ceded only when the reinsurer meets
the requirements of subsection
subsections (b), (c), (d), (e), or (f). If meeting the
requirements of subsection (d) or (e), the
requirements of or
(g) of this section. Credit shall be allowed under subsections (b), (c) or (d)
of
this section only as respects cessions of those kinds or
classes of business which the assuming
insurer is licensed or otherwise permitted to write or assume
in its state of domicile or, in the case
of a
to transact insurance or reinsurance. Credit shall be
allowed under subsections (d) or (e) of this
section only if the applicable requirements of subsection (g)(h) of this section
must also be met
have been satisfied.
(b) Credit shall be
allowed when the reinsurance is ceded to an assuming insurer which
that is licensed to transact insurance or reinsurance in
this state.
(c)(1) Credit
shall be allowed when the reinsurance is ceded to an assuming insurer
which that is accredited by the commissioner as
a reinsurer in this state. In order to be eligible for
an An accredited
accreditation a reinsurer is one which must:
(i)(1) Files File with the
commissioner evidence of its submission to this state's
jurisdiction;
(ii)(2) Submits
Submit to this state's authority to examine its books and records;
(iii)(3) Is
Be licensed to transact insurance or
reinsurance in at least one state, or in the
case of a is
be entered through and licensed to
transact insurance or reinsurance in at least one state; and
(iv)(4)
Annually files file with the 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 either:
(5) Demonstrate to
the satisfaction of the 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), and its accreditation has not
been denied by the commissioner
within ninety (90) days after submission of its application.
(A) Maintains a
surplus regarding policyholders in an amount which is not less than
twenty million dollars ($20,000,000) and whose accreditation
has not been denied by the
commissioner within ninety (90) days of its submission; or
(B) Maintains a
surplus regarding policyholders in an amount less than twenty million
dollars ($20,000,000) and whose accreditation has been
approved by the commissioner;
(2) No credit shall
be allowed a domestic ceding insurer if the assuming insurers'
accreditation has been revoked by the commissioner after notice and
hearing.
(d)(1) Credit shall be
allowed when the reinsurance is ceded to an assuming insurer
which that is domiciled and licensed in, or
in the case of a
assuming insurer is entered through, a state which that
employs standards regarding credit for
reinsurance substantially similar to those applicable under this
statute, and the assuming insurer
or
(i)
Maintains a surplus regarding policyholders in an amount not less than twenty
million
dollars ($20,000,000); and
(ii)
Submits to the authority of this state to examine its books and records;
.
(2) Provided, that the
requirement of subsection (d)(1)(i)
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
which that maintains a trust fund in a qualified
section 27-1.1-3(b), for the payment of the valid claims of
its policyholders and
ceding insurers, and their assigns and successors in
interest. To enable the commissioner to
determine the sufficiency of the trust fund, the The assuming insurer
shall report annually to the
commissioner information substantially the same as that required
to be reported on the National
Association of Insurance
Commissioners annual statement form by licensed insurers. to enable
the commissioner to determine the sufficiency of the
trust fund. In the case of a single assuming
insurer, the trust shall consist of a trusted account
representative of the assuming insurer's
liabilities attributable to business written in the
insurer shall maintain a trusted surplus of not less than
twenty million dollars ($20,000,000). In
the case of a group including incorporated and/or
individual unincorporated underwriters, the
trust shall consist of a trusted account representative of
the group's liabilities attributable to
business written in the
which one hundred million dollars ($100,000,000) shall be
held jointly for the benefit of United
States ceding insurers of any member of the group; 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 solvency regulation and control
by the group's domiciliary regulator
as are the unincorporated members; and the group shall
make available to the commissioner an
annual certification of the solvency of each underwriter by
the group's domiciliary regulator and
its independent public accountants; The assuming insurer shall submit to examination
of its books
and records by the commissioner, and bear the expense of
examination.
(2)(i) 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.
(ii) The form of the
trust and any trust amendments shall also be filed with the
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
title to its assets in its trustees for the benefit of the
assuming insurer's
assigns and successors in interest. The trust and the
assuming insurer shall be subject to
examination as determined by the commissioner.
(iii) 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. No later than February 28
of each year the trustee of the trust shall report to
the 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 will not expire prior to the following
December 31.
(3) The following
requirements apply to the following categories of assuming insurer:
(i)
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
insurers, and, in addition, the assuming insurer shall
maintain a trusteed surplus of not less than
twenty million dollars ($20,000,000), except as provided in
paragraph(3)(ii) below.
(ii) 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
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 may not be reduced to an amount
less than thirty percent (30%) of the assuming insurer's
liabilities attributable to reinsurance ceded
by
(iii)(A) In the case
of a group including incorporated and individual unincorporated
underwriters:
(B) 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
(C) For reinsurance
ceded under reinsurance agreements with an inception date on or
before December 31, 1992, and not amended or renewed after
that date, not-withstanding the
other provisions of this chapter, 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
(D) In addition to
these trusts, the group shall maintain in trust a trusteed
surplus of
which one hundred million dollars ($100,000,000) shall be
held jointly for the benefit of the
domiciled ceding insurers of any member of the group for all
years of account; and
(E) 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.
(I) 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.
(2)(iv) In the case of a group of incorporated insurers
underwriters under common
administration which the group shall:
(i) complies with the filing requirements contained in
subsection (e)(1), (ii) has
(A)
Have continuously transacted an insurance business outside the
least three (3) years immediately prior to making
application for accreditation, (iii) submits to this
state's authority to examine its books and records and bears
the expenses of the examination, and
(iv)
(B) Maintain an
aggregate policyholders surplus of ten billion dollars ($10,000,000,000).,
(C) Maintain a the
trust fund shall be in an amount equal to not less than
the group's
several liabilities attributable to business ceded by
member of the group pursuant to reinsurance contracts issued
in the name of the group.; plus the
group shall
(D) In addition,
maintain a joint trusted surplus of which one hundred million dollars
($100,000,000) shall be held jointly for the benefit
of
member of the group as additional security for any these
liabilities, and
(E) Within ninety
(90) days after its financial statements are due to be filed with the
group's domiciliary regulator, each member of the group shall make available
to the
commissioner an annual certification of the 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;
(3) The trust shall
be established in a form approved by the commissioner. 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
assets in the trustees of the trust for its
assigns and successors in interest. The trust and the
assuming insurer shall be subject to
examination as determined by the commissioner. The trust
described in this subsection must
remain in effect for as long as the assuming insurer shall
have outstanding obligations due under
the reinsurance agreements subject to the trust;
(4) No later than
February 28 of each year the trustees of the trust shall report to the
commissioner in writing setting forth 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 this is planned, or
certify that the trust shall not expire prior to the next
following December 31;
(f) (1) Credit shall
be allowed when the reinsurance is ceded to an assuming insurer not
meeting the requirements of subsections (b), (c), (d), or
(e), but only with respect to the insurance
of risks located in jurisdictions where the reinsurance
is required by applicable law or regulation
of that jurisdiction; or
(2) Credit may be
allowed, at the discretion of the commissioner, when reinsurance is
ceded to a protected cell of a protected cell company
organized under the Protected Cell
Companies Act, chapter 64 of this title, in the form
of an attribution of assets, insurance liabilities
and exposures from the general account of the protected
cell company as required by sections 27-
64-4 and 27-64-5.
(g) (1) If the
assuming insurer is not licensed or accredited to transact insurance or
reinsurance in this state, the credit permitted by subsections
(d) and (e) shall not be allowed
unless the assuming insurer agrees in the reinsurance
agreements:
(i)
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
(ii) To designate the
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 company;
(2) This subsection
is not intended to conflict with or override the obligation of the
parties to a reinsurance agreement to arbitrate their disputes,
if an obligation is created in the
agreement.
(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:
(i)
The assuming insurer must be domiciled and licensed to transact insurance or
reinsurance in a qualified jurisdiction, as determined by the
commissioner pursuant to
paragraph(f)(iii) of this subsection;
(ii) The assuming
insurer must maintain minimum capital and surplus, or its equivalent,
in an amount to be determined by the commissioner
pursuant to regulation;
(iii) The assuming
insurer must maintain financial strength ratings from two or more
rating agencies deemed acceptable by the commissioner
pursuant to regulation;
(iv)
The assuming insurer must 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
(v) The assuming
insurer must 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
(vi)
The assuming insurer must 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 (i) above:
(i)
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;
(ii) 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
(iii) 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.
(i)
In order to determine whether the domiciliary jurisdiction of a non-U.S.
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-U.S. jurisdiction to reinsurers
licensed and domiciled in the
A qualified jurisdiction must agree to share
information and cooperate with the commissioner
with respect to all certified reinsurers domiciled within
that jurisdiction. A jurisdiction may not be
recognized as a qualified jurisdiction if the commissioner has
determined that the jurisdiction
does not adequately and promptly enforce final
Additional factors may be considered in the discretion
of the commissioner.
(ii) A list of
qualified jurisdictions shall be published through the 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.
(iii)
financial standards and accreditation program shall be
recognized as qualified jurisdictions.
(iv)
If a certified reinsurer's domiciliary jurisdiction ceases to be
a qualified jurisdiction,
the commissioner has the discretion to 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
this subsection at a level consistent with its rating, as
specified in regulations promulgated by the
commissioner.
(i)
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 3, or in a multi-
beneficiary trust in accordance with subsection (e) of this
section, except as otherwise provided in
this subsection.
(ii) 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 multi-beneficiary 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
condition to the grant of certification under subsection (f) of
this section 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.
(iii) The minimum trusteed surplus requirements provided in subsection D are
not
applicable with respect to a multi-beneficiary 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).
(iv)
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 has the discretion to 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.
(v) For purposes of
this subsection, 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.
(A) As used in this
subsection, the term "terminated" refers to revocation, suspension,
voluntary surrender and inactive status.
(B) If the
commissioner continues to assign a higher rating as permitted by other
provisions of this section, this requirement does not apply to a
certified reinsurer in inactive status
or to a reinsurer whose certification has been
suspended.
(6) If an applicant
for certification has been certified as a reinsurer in an NAIC accredited
jurisdiction, the commissioner has the discretion to defer to that
jurisdiction's certification, and
has the discretion to 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.
(g) Credit shall be
allowed when the reinsurance is ceded to an assuming insurer not
meeting the requirements of subsections (b), (c), (d) (e) or
(f) of this section, but only as to the
insurance of risks located in jurisdictions where the
reinsurance is required by applicable law or
regulation of that jurisdiction.
(h) 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)(i) 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
(ii) To designate the
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.
(2) 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.
(i)
If the assuming insurer does not meet the requirements of subsections (b), (c)
or (d),
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 subsection (e)(iii) 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
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.
(4) The grantor shall
waive any right otherwise available to it under
inconsistent with this provision.
(j) 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
must give the reinsurer notice and opportunity for hearing. The
suspension or revocation may not take effect until after the
commissioner's order on hearing,
unless:
(i)
The reinsurer waives its right to hearing;
(ii) 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 subparagraph (f)(vi) of this
section; or
(iii) The
commissioner finds that an emergency requires immediate action and a court of
competent jurisdiction has not stayed the commissioner's
action.
(A) 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 3.
If a reinsurer's accreditation or certification is
revoked, no credit for reinsurance may 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 subsection
(f)(v) or section 3.
(k) 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.
SECTION 2. Sections 27-1.1-2 and 27-1.1-5 of the General
Laws in Chapter 27-1.1
entitled "Credit for Reinsurance Act" are hereby
amended to read as follows:
27-1.1-2. Reduction
from liability for reinsurance ceded by a domestic insurer to an
assuming insurer Asset or reduction from liability for reinsurance
ceded by a domestic
insurer to an assuming insurer not meeting the requirements
of 27-1.1-1. -- A An asset or a
reduction from liability for the reinsurance ceded by a
domestic insurer to an assuming insurer
not meeting the requirements of section 27-1.1-1 shall be
allowed in an amount not exceeding the
liabilities carried by the ceding insurer. The reduction shall be
in the amount of funds held by or
on behalf of the ceding insurer, including funds held in
trust for the ceding insurer, under a
reinsurance contract with the assuming insurer as security for
the payment of obligations
thereunder under the contract, if the security is held in
the
solely by, and under the exclusive control of, the ceding
insurer, or, in the case of a trust, held in a
qualified
be in the form of:
(1) Cash;
(2) Securities listed
by the securities valuation office of the National Association of
Insurance Commissioners, including those deemed
exempt from filing as defined by the Purposes
and Procedures Manual of the Securities Valuation Office, and qualifying as admitted assets;
(3)(i) Clean, irrevocable, unconditional letters of credit,
issued or confirmed by a
qualified
December 31st in respect of the year for which the
filing is being made, and in the possession of,
or in trust for,
the ceding company insurer on or before the filing date of its
annual statement.
(ii) Letters of
credit meeting applicable standards of issuer acceptability as of the dates of
their issuance or confirmation shall, notwithstanding the
issuing or confirming institution's
subsequent failure to meet applicable standards of issuer
acceptability, continue to be acceptable
as security until their expiration, extension, renewal,
modification, or amendment, whichever first
occurs; or
(4) Any other form of
security acceptable to the commissioner.
27-1.1-5.
Reinsurance agreements affected. -- This chapter shall apply to all
cessions
after June 18, 1991, the effective date of this
chapter under reinsurance agreements that have had
an inception, anniversary, or renewal date not less than
six (6) months after June 18, 1991, the
effective date of this chapter.
SECTION 3. Chapter 27-1.1 of the General Laws entitled
"Credit for Reinsurance Act" is
hereby amended by adding thereto the following section:
27-1.1-0.5.
Purpose. -- The purpose of this chapter is to
protect the interest of insureds,
claimants, ceding insurers, assuming insurers and the public
generally. The legislature hereby
declares its intent is to ensure adequate regulation of
insurers and reinsurers and adequate
protection for those to whom they owe obligations. In
furtherance of that state interest, the
legislature hereby provides a mandate that upon the insolvency of
a non-U.S. insurer or reinsurer
that provides security to fund its
representing the security shall be maintained in the
and valued by the state insurance commissioner with
regulatory oversight, and the assets shall be
distributed, in accordance with the insurance laws of the state
in which the trust is domiciled that
are applicable to the liquidation of domestic
that the matters contained in this chapter are fundamental
to the business of insurance in
accordance with 15 U.S.C. §§ 1011-1012.
SECTION 4. Sections 27-1.1-6 and 27-1.1-7 of the General
Laws in Chapter 27-1.1
entitled "Credit for Reinsurance Act" are hereby
repealed.
27-1.1-6.
Asset or deduction from liability. --
No credit shall be allowed as an admitted
asset or as a deduction from liability to any ceding
company for reinsurance unless the
reinsurance is payable by the assuming company on the basis of
the liability of the ceding
company under the contract or contracts reinsured without diminution
because of the insolvency
of the ceding company.
27-1.1-7.
Payment by assuming company. -- (a)
No credit shall be allowed for
reinsurance unless the reinsurance agreement provides that
payments by the assuming company
shall be made directly to the ceding company or to its
liquidator, receiver, or statutory successor,
except where the contract specifically provides another
payee of the reinsurance in the event of
the insolvency of the ceding company, or where the
assuming company, with the consent of the
direct insured or insureds, has
assumed the policy obligations of the ceding company to the
payees under the policies and in substitution for the
obligations of the ceding company to the
payees.
(b) Except as
provided in this section, no assuming company may pay or settle, or agree
to pay or settle, any policy claim, or any portion of a
claim, directly to or with a policyholder of
any ceding company if an order of rehabilitation or
liquidation has been entered against the
ceding company.
SECTION 5. This act shall take effect upon passage.
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LC01424/SUB A
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