Pursuant to Section 173.1(2) of the Code, the Director shall
allow a reduction from liability for reinsurance ceded by a domestic insurer to
an assuming insurer not meeting the requirements of Section 173.1(1) of the
Code 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 exclusive benefit of the
ceding insurer, under a reinsurance contract with that assuming insurer as
security for the payment of obligations thereunder. The security must be held
in the U.S. subject to withdrawal solely by, and under the exclusive control
of, the ceding insurer or, in the case of a trust, held in a qualified U.S.
financial institution as defined in Section 173.1(3)(B) of the Code.
a) This security may be in the form of any of
the following:
1) Cash.
2) Securities qualifying as admitted assets
under Article VIII of the Code and listed by the NAIC Securities Valuation
Office, including those deemed exempt from filing by the "Purposes and
Procedures Manual of the NAIC Investment Analysis Office" (National Association
of Insurance Commissioners, One New York Plaza, Ste. 4210, New York NY 10004)
(Volume 18/Issue 1, December 31, 2018) (no later editions or
amendments).
3) Clean, irrevocable,
unconditional and "evergreen" letters of credit issued or confirmed by a
qualified U.S. institution, as defined in Section 173.1(3)(A) of the Code,
effective no later than December 31 of the year for which filing is being made,
and in the possession of the ceding insurer on or before the filing date of its
annual financial statement. 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.
4) Any
other form of security acceptable to the Director.
b) An admitted asset or a reduction from
liability for reinsurance ceded to an unauthorized assuming insurer pursuant to
subsections (a)(1), (2) and (3) shall be allowed only when the requirements of
Section
1104.70,
1104.80
or
1104.90 are
met.
