760 IAC 1-56-7.8 - Credit for reinsurance; reciprocal jurisdictions
Authority: IC 27-1-3-7; IC 27-6-10.1-5
Affected: IC 5-14-3-4; IC 27-6-10.1
Sec. 7.8.
(a)
Pursuant to IC 27-6-10.1-2(F)(1), the commissioner shall allow credit for
reinsurance ceded by a domestic insurer to an assuming insurer that is licensed
to write reinsurance by, and has its head office or is domiciled in, a
reciprocal jurisdiction, and which meets the other requirements of this
rule.
(b) A reciprocal jurisdiction
is a jurisdiction, as designated by the commissioner pursuant to subsection
(d), that meets one (1) of the following:
(1)
A non-U.S. 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 subsection, a "covered
agreement" is an agreement entered into pursuant to the Dodd-Frank Wall Street
Reform and Consumer Protection Act, 31 U.S.C. ยงยง 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 U.S.
jurisdiction that meets the requirements for accreditation under the National
Association of Insurance Commissioners (NAIC) financial standards and
accreditation program; or
(3) A
qualified jurisdiction, as determined by the commissioner pursuant to IC
27-6-10.1-2(E)(3) and section 7.5(c) of this rule, which is not otherwise
described in subdivision (1) or (2), and which the commissioner determines
meets all of the following additional requirements:
(A) Provides that an insurer which has its
head office or is domiciled in such qualified jurisdiction shall receive credit
for reinsurance ceded to a U.S. domiciled assuming insurer in the same manner
as credit for reinsurance is received for reinsurance assumed by insurers
domiciled in such qualified jurisdiction.
(B) Does not require a U.S. domiciled
assuming insurer to establish or maintain a local presence as a condition for
entering into a reinsurance agreement with any ceding insurer subject to
regulation by the non-U.S. jurisdiction or as a condition to allow the ceding
insurer to recognize credit for such reinsurance.
(C) Recognizes the U.S. state regulatory
approach to group supervision and group capital, by providing written
confirmation by a competent regulatory authority, in such qualified
jurisdiction, that insurers and insurance groups that are domiciled or maintain
their headquarters in this state or another jurisdiction accredited by the NAIC
shall be subject only to worldwide prudential insurance group supervision,
including worldwide group governance, solvency and capital, and reporting, as
applicable, by the commissioner or the commissioner of the domiciliary state,
and will not be subject to group supervision at the level of the worldwide
parent undertaking of the insurance or reinsurance group by the qualified
jurisdiction.
(D) Provides written
confirmation by a competent regulatory authority in such qualified jurisdiction
that information regarding insurers and their parent, subsidiary, or affiliated
entities, if applicable, shall be provided to the commissioner in accordance
with a memorandum of understanding or similar document between the commissioner
and such qualified jurisdiction, including, but not limited to, the
International Association of Insurance Supervisors Multilateral Memorandum of
Understanding or other multilateral memoranda of understanding coordinated by
the NAIC.
(c)
Credit shall be allowed when the reinsurance is ceded from an insurer domiciled
in this state to an assuming insurer meeting each of the following conditions:
(1) The assuming insurer must be licensed to
transact reinsurance by, and have its head office or be domiciled in, a
reciprocal jurisdiction.
(2) The
assuming insurer must have and maintain on an ongoing basis minimum capital and
surplus, or its equivalent, calculated on at least an annual basis as of the
preceding December 31 or at the annual date otherwise statutorily reported to
the reciprocal jurisdiction, and confirmed as set forth in subdivision (7)
according to the methodology of its domiciliary jurisdiction, in the following
amounts:
(A) Not less than two hundred fifty
million dollars ($250,000,000).
(B)
If the assuming insurer is an association, including incorporated and
individual unincorporated underwriters:
(i)
minimum capital and surplus equivalents (net of liabilities) or own funds of
the equivalent of at least two hundred fifty million dollars ($250,000,000);
and
(ii) a central fund containing
a balance of the equivalent of at least two hundred fifty million dollars
($250,000,000).
(3) The assuming insurer must have and
maintain on an ongoing basis a minimum solvency or capital ratio, as
applicable, as follows:
(A) If the assuming
insurer has its head office or is domiciled in a reciprocal jurisdiction as
defined in subsection (b)(1), the ratio specified in the applicable covered
agreement.
(B) If the assuming
insurer is domiciled in a reciprocal jurisdiction as defined in subsection
(b)(2), a risk-based capital (RBC) ratio of three hundred percent (300%) of the
authorized control level, calculated in accordance with the formula developed
by the NAIC.
(C) If the assuming
insurer is domiciled in a reciprocal jurisdiction as defined in subsection
(b)(3), after consultation with the reciprocal jurisdiction and considering any
recommendations published through the NAIC Committee Process, such solvency or
capital ratio as the commissioner determines to be an effective measure of
solvency.
(4) The
assuming insurer must agree to and provide adequate assurance, in the form of a
properly executed Form RJ-1, as set forth in section 17 of this rule, of its
agreement to the following:
(A) The assuming
insurer must agree to provide prompt written notice and explanation to the
commissioner if it falls below the minimum requirements set forth in
subdivision (2) or (3), or if any regulatory action is taken against it for
serious noncompliance with applicable law.
(B) The assuming insurer must 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 also
require that such consent be provided and included in each reinsurance
agreement under the commissioner's jurisdiction.
(C) Nothing in this provision shall 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.
(D) The assuming insurer must consent in
writing to pay all final judgments, wherever enforcement is sought, obtained by
a ceding insurer, that have been declared enforceable in the territory where
the judgment was obtained.
(E) Each
reinsurance agreement must include a provision requiring the assuming insurer
to provide security in an amount equal to one hundred percent (100%) of the
assuming insurer's liabilities 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 estate, if
applicable.
(F) The assuming
insurer must confirm that it is not presently participating in any solvent
scheme of arrangement, which involves this state's ceding insurers, and agrees
to notify the ceding insurer and the commissioner and to provide one hundred
percent (100%) security to the ceding insurer consistent with the terms of the
scheme, should the assuming insurer enter into such a solvent scheme of
arrangement. Such security shall be in a form consistent with the provisions of
IC 27-6-10.1-2(E) and IC 27-6-10.1-3 and section 10, 11, or 12 of this rule.
For purposes of this rule, the term "solvent scheme of arrangement" means a
foreign or alien statutory or regulatory compromise procedure subject to
requisite majority creditor approval and judicial sanction in the assuming
insurer's home jurisdiction, either to finally commute liabilities of duly
noticed classed members or creditors of a solvent debtor, or to reorganize or
restructure the debts and obligations of a solvent debtor on a final basis, and
which may be subject to judicial recognition and enforcement of the arrangement
by a governing authority outside the ceding insurer's home
jurisdiction.
(G) The assuming
insurer must agree in writing to meet the applicable information filing
requirements as set forth in subdivision (5).
(5) The assuming insurer or its legal
successor must provide, if requested by the commissioner, on behalf of itself
and any legal predecessors, the following documentation to the commissioner:
(A) For the two (2) years preceding entry
into the reinsurance agreement and on an annual basis thereafter, the assuming
insurer's annual audited financial statements, in accordance with the
applicable law of the jurisdiction of its head office or domiciliary
jurisdiction, as applicable, including the external audit report.
(B) For the two (2) years preceding entry
into the reinsurance agreement, the solvency and financial condition report or
actuarial opinion, if filed with the assuming insurer's supervisor.
(C) Prior to entry into the reinsurance
agreement and not more than semi-annually thereafter, an updated list of all
disputed and overdue reinsurance claims outstanding for ninety (90) days or
more, regarding reinsurance assumed from ceding insurers domiciled in the
United States.
(D) Prior to entry
into the reinsurance agreement and not more than semi-annually thereafter,
information regarding the assuming insurer's assumed reinsurance by ceding
insurer, ceded reinsurance by the assuming insurer, and reinsurance recoverable
on paid and unpaid losses by the assuming insurer to allow for the evaluation
of the criteria set forth in subdivision (6).
(6) The assuming insurer must maintain a
practice of prompt payment of claims under reinsurance agreements. The lack of
prompt payment will be evidenced if any of the following criteria is met:
(A) More than fifteen percent (15%) of the
reinsurance recoverables from the assuming insurer are overdue and in dispute
as reported to the commissioner.
(B) More than fifteen percent (15%) of the
assuming insurer's ceding insurers or reinsurers have overdue reinsurance
recoverable on paid losses of ninety (90) days or more which are not in dispute
and which exceed for each ceding insurer one hundred thousand dollars
($100,000), or as otherwise specified in a covered agreement.
(C) The aggregate amount of reinsurance
recoverable on paid losses which are not in dispute, but are overdue by ninety
(90) days or more, exceeds fifty million dollars ($50,000,000), or as otherwise
specified in a covered agreement.
(7) The assuming insurer's supervisory
authority must confirm to the commissioner on an annual basis that the assuming
insurer complies with the requirements set forth in subdivisions (2) and
(3).
(8) Nothing in this
subdivision precludes an assuming insurer from providing the commissioner with
information on a voluntary basis.
(d) The commissioner shall timely create and
publish a list of reciprocal jurisdictions in the following manner:
(1) A list of reciprocal jurisdictions is
published through the NAIC Committee Process. The commissioner's list shall
include any reciprocal jurisdiction as defined under subsection (b)(1) and
(b)(2) and shall consider any other reciprocal jurisdiction included on the
NAIC list. The commissioner may approve a jurisdiction that does not appear on
the NAIC list of reciprocal jurisdictions as provided by applicable law,
regulation, or in accordance with criteria published through the NAIC Committee
Process.
(2) The commissioner may
remove a jurisdiction from the list of reciprocal jurisdictions upon a
determination that the jurisdiction no longer meets one (1) or more of the
requirements of a reciprocal jurisdiction, as provided by applicable law, rule,
or in accordance with a process published through the NAIC Committee Process,
except that the commissioner shall not remove from the list a reciprocal
jurisdiction as defined under subsection (b)(1) and (b)(2). Upon removal of a
reciprocal jurisdiction from this list, credit for reinsurance ceded to an
assuming insurer domiciled in that jurisdiction shall be allowed, if otherwise
allowed pursuant to IC 27-6-10.1 or this rule.
(e) The commissioner shall timely create and
publish a list of assuming insurers that have satisfied the conditions set
forth in this section and to which cessions shall be granted credit in
accordance with this rule in the following manner:
(1) If an NAIC accredited jurisdiction has
determined that the conditions set forth in subsection (c) have been met, the
commissioner has the discretion to defer to that jurisdiction's determination,
and add such assuming insurer to the list of assuming insurers to which
cessions shall be granted credit in accordance with this subsection. The
commissioner may accept financial documentation filed with another NAIC
accredited jurisdiction or with the NAIC in satisfaction of the requirements of
subsection (c).
(2) When requesting
that the commissioner defer to another NAIC accredited jurisdiction's
determination, an assuming insurer must submit a properly executed Form RJ-1
and additional information as the commissioner may require. A state that has
received such a request will notify other states through the NAIC Committee
Process and provide relevant information with respect to the determination of
eligibility.
(f) If the
commissioner determines that an assuming insurer no longer meets one (1) or
more of the requirements under this section, the commissioner may revoke or
suspend the eligibility of the assuming insurer for recognition under this rule
in the following manner:
(1) While an
assuming insurer's eligibility 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 assuming insurer's obligations under the
contract are secured in accordance with section 9 of this rule.
(2) If an assuming insurer's eligibility 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 assuming insurer's
obligations under the contract are secured in a form acceptable to the
commissioner and consistent with the provisions of section 9 of this
rule.
(g) Before denying
statement credit or imposing a requirement to post security with respect to
subsection (f), or adopting any similar requirement that will have
substantially the same regulatory impact as security, the commissioner shall:
(1) communicate with the ceding insurer, the
assuming insurer, and the assuming insurer's supervisory authority that the
assuming insurer no longer satisfies one (1) of the conditions listed in
subsection (c);
(2) provide the
assuming insurer with thirty (30) days from the initial communication to submit
a plan to remedy the defect, and ninety (90) days from the initial
communication to remedy the defect, except in exceptional circumstances in
which a shorter period is necessary for policyholder and other consumer
protection;
(3) after the
expiration of ninety (90) days or less, as set out in subdivision (2), if the
commissioner determines that no action or insufficient action was taken by the
assuming insurer, the commissioner may impose any of the requirements as set
out in this subsection; and
(4)
provide a written explanation to the assuming insurer of any of the
requirements set out in this subsection.
(h) 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 liabilities.
Notes
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