PURPOSE: The director is adding a new section (7)
regarding reciprocal jurisdictions and reinsurance credit. Additional
amendments were necessary to update internal references. This amendment
effectuates section
375.246,
RSMo, as amended by SB 6 (2021).
(1) If any provision of this rule, or the
application of the provision to any person or circumstance, is held invalid,
the remainder of this rule, and the application of the provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected.
(2) Credit for
Reinsurance-Reinsurer Licensed in this State. Pursuant to section 375.246.1(1),
RSMo, the director shall allow credit for reinsurance ceded by a domestic
insurer to an assuming insurer that was licensed in this state as of any date
on which statutory financial statement credit for reinsurance is claimed. For
purposes of this rule, an insurer whose certificate of authority has been
suspended or revoked for one (1) or more of the grounds set forth in section
375.881.1(1), (2), or (3), RSMo, shall be deemed not licensed in this
state.
(3) Credit for
Reinsurance-Accredited Reinsurers.
(A)
Pursuant to section 375.246.1(2), RSMo, the director shall allow credit for
reinsurance ceded by a domestic insurer to an assuming insurer that is
accredited as a reinsurer in this state as of the date on which statutory
financial statement credit for reinsurance is claimed. An accredited reinsurer
must-
1. File with the director the
following:
A. A properly executed Reinsurer
Application, the form of which is set forth as Exhibit 1 of this rule, included
herein, revised December 10, 2013, or any form which substantially comports
with the specified form;
B. A
certified copy of a certificate of authority or other acceptable evidence that
it is licensed to transact insurance or reinsurance in at least one (1) 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 (1) state;
C. A properly
executed appointment of the director to acknowledge or receive service of
process, the form of which is set forth as Exhibit 2 of this rule included
herein, revised September 23, 2013, or any form which substantially comports
with the specified form;
D. A
properly executed Certificate of Assuming Insurer (Form AR-1), which is set
forth as Exhibit 3 of this rule included herein, revised September 23, 2013, or
any form which substantially comports with the specified form, as evidence of
its submission to this state's jurisdiction and to this state's authority to
examine its books and records;
E. A
copy of its articles of incorporation or association, as amended, duly
certified by the proper officer of the state under whose laws it is organized
or incorporated;
F. A copy of its
bylaws, certified by its secretary;
G. The National Association of Insurance
Commissioner (NAIC) Uniform Certificate of Authority Application (UCAA) Form 11
Biographical Affidavit, the form of which is included herein as Exhibit 4 of
this rule, revised September 23, 2013, or any form which substantially comports
with the specified form; and
H. A
copy of the registration statement of any holding company system if it is a
member of such a system.
2. File annually with the director a copy of
its annual statement filed with the insurance department of its state of
domicile or, in the case of an alien assuming insurer, with the state through
which it is entered and in which it is licensed to transact insurance or
reinsurance, and a copy of its most recent audited financial
statement.
3. Include, with the
documents required to be filed under the preceding provisions of section (3) of
this rule, the appropriate filing fees as set forth in section
374.230,
RSMo; and
4. Maintain a surplus as
regards policy-holders in an amount not less than twenty (20) million dollars,
or obtain the affirmative approval of the director upon a finding that it has
adequate financial capacity to meet its reinsurance obligations and is
otherwise qualified to assume reinsurance from domestic insurers.
(B) If the director determines
that the assuming insurer has failed to meet or maintain any of these
qualifications, the director may, upon written notice and opportunity for a
hearing, suspend or revoke the accreditation. Credit shall not be allowed a
domestic ceding insurer under section (3) of this rule, if the assuming
insurer's accreditation has been revoked by the director, or if the reinsurance
was ceded while the assuming insurer's accreditation was under suspension by
the director.
(4) Credit
for Reinsurance-Reinsurer Domiciled in Another State.
(A) Pursuant to section 375.246.1(3), RSMo,
the director shall allow credit for reinsurance ceded by a domestic insurer to
an assuming insurer that as of any date on which statutory financial statement
credit for reinsurance is claimed-
1. Files
with the director-
A. A properly executed
Reinsurer Application, the form of which is set forth as Exhibit 1 of this
rule, included herein, revised December 10, 2013, or any form which
substantially comports with the specified form;
B. A properly executed appointment of the
director to acknowledge or receive service of process, the form of which is set
forth as Exhibit 2 of this rule, included herein, revised September 23, 2013,
or any form which substantially comports with the specified form; and
C. A properly executed Form AR-2, the form of
which is included herein as Exhibit 5 of this rule, revised September 23, 2013,
or any form which substantially comports with the specified form, as evidence
of its submission to this state's authority to examine its books and
records.
2. Files with
the director in addition to its initial filing, and annually after that, prior
to March 1 of each year, a certified copy of the annual statement it has filed
with the insurance department of its state of domicile or, in the case of an
alien assuming insurer, with the state through which it is entered and in which
it is licensed to transact insurance or reinsurance, including an actuarial
certification and management discussion and analysis required as part of the
NAIC annual statement requirements;
3. 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 section
375.246,
RSMo (the Act) and this rule;
4.
Includes with the documents required to be filed under preceding provisions of
section (4) of this rule, the appropriate filing fees as set forth in section
374.230,
RSMo; and
5. Maintains a surplus as
regards policyholders in an amount not less than twenty (20) million
dollars.
(B) The
provisions of section (4) of this rule relating to surplus as regards
policyholders shall not apply to reinsurance ceded and assumed pursuant to
pooling arrangements among insurers in the same holding company system. As used
in this section, "substantially similar" standards means credit for reinsurance
standards that the director determines equal or exceed the standards of
Reinsurance Model Act (the Act) and this rule.
(5) Credit for Reinsurance-Reinsurers
Maintaining Trust Funds.
(A) Pursuant to
section 375.246.1(4), RSMo, the director shall allow credit for reinsurance
ceded by a domestic insurer to an assuming insurer which, as of any date on
which statutory financial statement credit for reinsurance is claimed, and
thereafter for so long as credit for reinsurance is claimed and therefore for
so long as credit for reinsurance is claimed, maintains a trust fund in an
amount prescribed in this rule in a qualified United States financial
institution as defined in section 375.246.3(2), RSMo, for the payment of the
valid claims of its United States domiciled ceding insurers, their assigns and
successors in interest. The assuming insurer shall report annually to the
director substantially the same information as that required to be reported on
the NAIC annual statement form by licensed insurers, to enable the director to
determine the sufficiency of the trust fund.
(B) The following requirements apply to the
following categories of assuming insurer:
1.
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 domiciled insurers, and in addition, the
assuming insurer shall maintain a trusteed surplus of not less than twenty (20)
million dollars, except as provided in paragraph (5)(B)2. of this
rule;
2. 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 director 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 may 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.
3. The trust fund for a
group including incorporated and individual unincorporated underwriters shall
consist of:
A. For reinsurance ceded under
reinsurance agreements with an inception, amendment, or renewal date on or
after January 1, 1993, funds in trust 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
this rule, funds in trust 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 a trusteed surplus of which one-hundred (100) million dollars
shall be held jointly for the benefit of the United States domiciled ceding
insurers of any member of the group for all the years of the account.
4. 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.
The group shall, within ninety (90) days after its financial statements are due
to be filed with the group's domiciliary regulator, provide to the director-
A. An annual certification by the group's
domiciliary regulator of the solvency of each underwriter member of the group;
or
B. If a certification is
unavailable, a financial statement, prepared by independent public accountants,
of each underwriter member of the group.
5. The trust fund for a group of incorporated
insurers under common administration, whose members possess aggregate
policyholders' surplus of ten (10) billion dollars (calculated and reported in
substantially the same manner as prescribed by the annual statement
instructions and Accounting Practices and Procedures Manual of the NAIC) and
which has continuously transacted an insurance business outside the United
States for at least three (3) years immediately prior to making application for
accreditation, shall-
A. Consist of funds in
trust in an amount not less than the assuming insurer's several liabilities
attributable to business ceded by United States domiciled ceding insurers to
any members of the group pursuant to reinsurance contracts issued in the name
of such group;
B. Maintain a joint
trusteed surplus of which one hundred (100) million dollars shall be held
jointly for the benefit of United States domiciled ceding insurers of any
member of the group; and
C. File
with the director the following forms:
(I) A
Reinsurer Application, the form of which is included herein as Exhibit 1 of
this rule, revised December 10, 2013, or any form which substantially comports
with the specified form;
(II) A
properly executed Form AR-1 the form of which is included herein as Exhibit 3
of this rule, revised September 23, 2013, or any form which substantially
comports with the specified form, as evidence of the submission to this state's
authority to examine the books and records of any of its members and shall
certify that any member examined will bear the expense of any examination;
and
(III) Includes with the
documents required to be filed under preceding provisions of section (5) of
this rule the appropriate filing fees as set forth in section
374.230,
RSMo.
D. Within ninety
(90) days after the statements are due to be filed with the group's domiciliary
regulator, the group shall file with the director an annual certification of
each underwriter member's solvency by the member's domiciliary regulators, and
financial statements, prepared by independent public accountants, of each
underwriter member of the group.
(C) Trust Instrument.
1. Credit for reinsurance shall not be
granted unless the form of the trust and any amendments to the trust have been
approved by either the director or commissioner of the state where the trust is
domiciled or the director or commissioner of another state who, pursuant to the
terms of the trust instrument, has accepted responsibility for regulatory
oversight of the trust. The form of the trust and any trust amendments also
shall be filed with the director or commissioner of every state in which the
ceding insurer beneficiaries of the trust are domiciled. The trust instrument
shall provide that-
A. Contested claims shall
be valid and enforceable out of funds in trust to the extent remaining
unsatisfied thirty (30) days after entry of the final order of any court of
competent jurisdiction in the United States;
B. Legal title to the assets of the trust
shall be vested in the trustee for the benefit of the grantor's United States
ceding insurers, their assigns and successors in interest;
C. The trust shall be subject to examination
as determined by the director;
D.
The trust shall remain in effect for as long as the assuming insurer, or any
member or former member of a group of insurers, shall have outstanding
obligations under reinsurance agreements subject to the trust; and
E. No later than February 28 of each year,
the trustees of the trust shall report to the director in writing setting forth
the balance in 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.
2. Trust
Assets.
A. 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 subparagraph (5)(C)2.A. of
this rule, 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 director with regulatory oversight over the trust or with an order
of a court of competent jurisdiction directing the trustee to transfer to the
director with regulatory oversight over the trust or other designated receiver
all of the assets of the trust fund.
B. The assets shall be distributed by and
claims shall be filed with and valued by the director with regulatory oversight
over the trust in accordance with the laws of the state in which the trust is
domiciled applicable to the liquidation of domestic insurance
companies.
C. If the director with
regulatory oversight over the trust determines that the assets of the trust
fund or any part thereof are not necessary to satisfy the claims of the United
States beneficiaries of the trust, the director with regulatory oversight over
the trust shall return the assets, or any part thereof, to the trustee for
distribution in accordance with the trust agreement.
D. The grantor shall waive any right
otherwise available to it under United States law that is inconsistent with
this provision.
(D) For purposes of this subsection, the term
"liabilities" shall mean the assuming insurer's gross liabilities attributable
to reinsurance ceded by United States domiciled insurers excluding liabilities
that are otherwise secured by acceptable means, and, shall include:
1. For business ceded by domestic insurers
authorized to write accident and health, and property and casualty insurance-
A. Losses and allocated loss expenses paid by
the ceding insurer, recoverable from the assuming insurer;
B. Reserves for losses reported and
outstanding;
C. Reserves for losses
incurred but not reported;
D.
Reserves for allocated loss expenses; and
E. Unearned premiums.
2. For business ceded by domestic insurers
authorized to write life, health, and annuity insurance-
A. Aggregate reserves for life policies and
contracts net of policy loans and net due and deferred premiums;
B. Aggregate reserves for accident and health
policies;
C. Deposit funds and
other liabilities without life or disability contingencies; and
D. Liabilities for policy and contract
claims.
(E)
Assets deposited in trusts established pursuant to section 375.246.1, RSMo, of
this rule shall be valued according to their current fair market value and
shall consist only of cash in United States dollars, certificates of deposit
issued by a United States financial institution as defined in section
375.246.3(1), RSMo, clean, irrevocable, unconditional, and "evergreen" letters
of credit issued or confirmed by a qualified United States financial
institution, as defined in section 375.246.3(1), RSMo, and investments of the
type specified in subsection (5)(E) of this rule, but investments in or issued
by an entity controlling, controlled by or under common control with either the
grantor or beneficiary of the trust shall not exceed five percent (5%) of total
investments. No more than twenty percent (20%) of the total of the investments
in the trust may be foreign investments authorized under paragraphs (5)(E)1.,
(5)(E)3., subparagraph (5)(E)6.B., or paragraph (5)(E)7. of this rule, and no
more than ten percent (10%) of the total of the investments in the trust may be
securities denominated in foreign currencies. For purposes of applying the
preceding sentence, a depository receipt denominated in United States dollars
and representing rights conferred by a foreign security shall be classified as
a foreign investment denominated in a foreign currency. The assets of a trust
established to satisfy the requirements of section 375.246.1(4), RSMo, shall be
invested only as follows:
1. Government
obligations that are not in default as to principal or interest, that are valid
and legally authorized and that are issued, assumed, or guaranteed by-
A. The United States or by any agency or
instrumentality of the United States;
B. A state of the United States;
C. A territory, possession, or other
governmental unit of the United States;
D. An agency or instrumentality of a
governmental unit referred to in subparagraphs (5)(E)1.B. and C. of this rule
if the obligations shall be by law (statutory or otherwise) payable, as to both
principal and interest, from taxes levied or by law required to be levied or
from adequate special revenues pledged or otherwise appropriated or by law
required to be provided for making these payments, but shall not be obligations
eligible for investment under subparagraph (5)(E)1.D. of this rule, if payable
solely out of special assessments on properties benefited by local
improvements; or
E. The government
of any other country that is a member of the Organization for Economic
Cooperation and Development and whose government obligations are rated A or
higher, or the equivalent, by a rating agency recognized by the Securities
Valuation Office of the NAIC;
2. Obligations that are issued in the United
States, or that are dollar denominated and issued in a non-United States
market, by a solvent United States institution (other than an insurance
company) or that are assumed or guaranteed by a solvent United States
institution (other than an insurance company) and that are not in default as to
principal or interest if the obligations-
A.
Are rated A or higher (or the equivalent) by the securities rating agency
recognized by the Securities Valuation Office of the NAIC, or if not so rated,
are similar in structure and other material respects to other obligations of
the same institution that are so rated;
B. Are insured by at least one (1) authorized
insurer (other than the investing insurer or a parent, subsidiary, or affiliate
of the investing insurer) licensed to insure obligations in this state and,
after considering the insurance, are rated AAA (or the equivalent) by a
securities rating agency recognized by the Securities Valuation Office of the
NAIC; or
C. Have been designated as
Class One or Class Two by the Securities Valuation Office of the
NAIC;
3. Obligations
issued, assumed, or guaranteed by a solvent non-United States institution
chartered in a country that is a member of the Organization for Economic
Cooperation and Development or obligations of United States corporations in a
non-United States currency, provided that in either case the obligations are
rated A or higher, or the equivalent, by a rating agency recognized by the
Securities Valuation Office of the NAIC;
4. An investment made pursuant to the
provisions of paragraphs (5)(E)1., 2., or 3. of this rule shall be subject to
the following additional limitations:
A. An
investment in or loan upon the obligations of an institution other than an
institution that issues mortgage-related securities shall not exceed five
percent (5%) of the assets of the trust;
B. An investment in any one mortgage-related
security shall not exceed five percent (5%) of the assets of the
trust;
C. The aggregate total
investment in mortgage-related securities shall not exceed twenty-five percent
(25%) of the assets of the trust; and
D. Preferred or guaranteed shares issued or
guaranteed by a solvent United States institution are permissible investments
if all of the institution's obligations are eligible as investments under
subparagraphs (5)(E)2.A. and (5)(E)2.C. of this rule, but shall not exceed two
percent (2%) of the assets of the trust.
5. As used in this rule-
A. "Mortgage-related security" means an
obligation that is rated AA or higher (or the equivalent) by a securities
rating agency recognized by the Securities Valuation Office of the NAIC and
that either-
(I) Represents ownership of one
(1) or more promissory notes or certificates of interest or participation in
the notes (including any rights designed to assure servicing of, or the receipt
or timeliness of receipt by the holders of the notes, certificates, or
participation of amounts payable under, the notes, certificates or
participation), that-
(a) Are directly
secured by a first lien on a single parcel of real estate, including stock
allocated to a dwelling unit in a residential cooperative housing corporation,
upon which is located a dwelling or mixed residential and commercial structure,
or on a residential manufactured home as defined in
42 U.S.C.A. Section
5402(6), whether the manufactured home is considered real or personal property
under the laws of the state in which it is located; and
(b) Were originated by a savings and loan
association, savings bank, commercial bank, credit union, insurance company, or
similar institution that is supervised and examined by a federal or state
housing authority, or by a mortgagee approved by the Secretary of Housing and
Urban Development pursuant to
12 U.S.C.A. Sections 1709 and 1715 -b, or, where
the notes involve a lien on the manufactured home, by an institution or by a
financial institution approved for insurance by the Secretary of Housing and
Urban Development pursuant to
12 U.S.C.A. Section 1703; or
(II) Is secured by one (1) or more promissory
notes or certificates of deposit or participations in the notes (with or
without recourse to the insurer of the notes) and, by its terms, provides for
payments of principal in relation to payments, or reasonable projections of
payments, or notes meeting the requirements of subparts (5)(E)5.A.(I)(a) and
(5)(E)5.A.(I)(b) of this rule;
B. "Promissory note," when used in connection
with a manufactured home, shall also include a loan, advance, or credit sale as
evidenced by a retail installment sales contract or other instrument.
6. Equity Interests.
A. Investments in common shares or
partnership interests of a solvent United States institution are permissible
if-
(I) Its obligations and preferred shares,
if any, are eligible as investments under paragraph (5)(E)6. of this rule;
and
(II) The equity interests of
the institution (except an insurance company) are registered on a national
securities exchange as provided in the Securities Exchange Act of 1934, 15
U.S.C. sections
78a to
78kk or otherwise registered pursuant to that Act, and
if otherwise registered, price quotations for them are furnished through a
nationwide automated quotations system approved by the Financial Industry
Regulatory Authority, or successor organization. A trust shall not invest in
equity interest under part (5)(E)6.A.(II) of this rule an amount exceeding one
percent (1%) of the assets of the trust even though the equity interests are
not so registered and are not issued by an insurance company;
B. Investments in common shares of
a solvent institution organized under the laws of a country that is a member of
the Organization for Economic Cooperation and Development, if-
(I) All its obligations are rated A or
higher, or the equivalent, by a rating agency recognized by the Securities
Valuation Office of the NAIC; and
(II) The equity interests of the institution
are registered on a securities exchange regulated by the government of a
country that is a member of the Organization for Economic Cooperation and
Development;
C. An
investment or loan upon any one (1) institution's outstanding equity interests
shall not exceed one percent (1%) of the assets of the trust. The cost of an
investment in equity interests made pursuant to subparagraph (5)(E)6.C. of this
rule, when added to the aggregate cost of other investments in equity interests
then held pursuant to sub-paragraph (5)(E)6.A. of this rule, shall not exceed
ten percent (10%) of the assets in the trust;
7. Obligations issued, assumed, or guaranteed
by a multinational development bank, provided the obligations are rated A or
higher, or the equivalent, by a rating agency recognized by the Securities
Valuation Office of the NAIC.
8.
Investment companies.
A. Securities of an
investment company registered pursuant to the Investment Company Act of 1940,
15 U.S.C. section
80a, are permissible investments if the investment company-
(I) Invests at least ninety percent (90%) of
its assets in the types of securities that qualify as an investment under
paragraphs (5)(E)1., (5)(E)2., or (5)(E)3. of this rule or invests in
securities that are determined by the director to be substantively similar to
the types of securities set forth in paragraphs (5)(E)1., (5)(E)2., or (5)(E)3.
of this rule; or
(II) Invests at
least ninety percent (90%) of its assets in the types of equity interests that
qualify as an investment under subparagraph (5)(E)6.A. of this rule;
B. Investments made by a trust in
investment companies under subparagraph (5)(E)8.B. of this rule shall not
exceed the following limitations:
(I) An
investment in an investment company qualifying under part (5)(E)8.A.(I) of this
rule shall not exceed ten percent (10%) of the assets in the trust and the
aggregate amount of investment in qualifying investment companies shall not
exceed twenty-five percent (25%) of the assets in the trust; and
(II) Investments in an investment company
qualifying under part (5)(E)8.A.(II) of this rule shall not exceed five percent
(5%) of the assets in the trust, and the aggregate amount of investment in
qualifying investment companies shall be included when calculating the
permissible aggregate value of equity interests pursuant to subparagraph
(5)(E)6.A. of this rule.
9. Letters of Credit.
A. In order for a letter of credit to qualify
as an asset of the trust, the trustee shall have the right and the obligation
pursuant to the deed of trust or some other binding agreement (as duly approved
by the director), to immediately draw down the full amount of the letter of
credit and hold the proceeds in trust for the beneficiaries of the trust if the
letter of credit will otherwise expire without being renewed or
replaced.
B. The trust agreement
shall provide that the trustee shall be liable for its negligence, willful
misconduct, or lack of good faith. The failure of the trustee to draw against
the letter of credit in circumstances where such draw would be required shall
be deemed to be negligence and/or willful misconduct.
(F) A specific security provided to
a ceding insurer by an assuming insurer pursuant to section (8) of this rule
shall be applied, until exhausted, to the payment of liabilities of the
assuming insurer to the ceding insurer holding the specific security prior to,
and as a condition precedent for, presentation of a claim by the ceding insurer
for payment by a trustee of a trust established by the assuming insurer
pursuant to section (5) of this rule.
(6) Credit for Reinsurance-Certified
Reinsurers.
(A) Pursuant to section
375.246.1(5), RSMo, the director shall allow credit for reinsurance ceded by a
domestic insurer to an assuming insurer that has been certified as a reinsurer
in this state at all times for which statutory financial statement credit for
reinsurance is claimed under section (6) of this rule. The credit allowed shall
be based upon the security held by or on behalf of the ceding insurer in
accordance with a rating assigned to the certified reinsurer by the director.
The security shall be in a form consistent with the provisions of sections
375.246.1(5) and
375.246.2,
RSMo, and sections (10), (11), or (12) of this rule. The amount of security
required in order for full credit to be allowed shall correspond with the
following requirements:
1. Ratings
|
Security Required
|
Secure - 1
|
0%
|
Secure - 2
|
10%
|
Secure - 3
|
20%
|
Secure - 4
|
50%
|
Secure - 5
|
75%
|
Vulnerable - 6
|
100%
|
2. Affiliated
reinsurance transactions shall receive the same opportunity for reduced
security requirements as all other reinsurance transactions.
3. The director shall require the certified
reinsurer to post one hundred percent (100%), for the benefit of the ceding
insurer or its estate, security upon the entry of an order or rehabilitation,
liquidation, or conservation against the ceding insurer.
4. In order to facilitate the prompt payment
of claims, a certified reinsurer shall not be required to post security for
catastrophe recoverables for a period of one (1) year from the date of the
first instance of a liability reserve entry by the ceding company as a result
of a loss from a catastrophic occurrence as recognized by the director. The one
(1) year deferral period is contingent upon the certified reinsurer continuing
to pay claims in a timely manner. Reinsurance recoverables for only the
following lines of business as reported on the NAIC annual financial statement
related specifically to the catastrophic occurrence will be included in the
deferral:
A. Line 1: Fire;
B. Line 2: Allied Lines;
C. Line 3: Farmowners multiple
peril;
D. Line 4: Homeowners
multiple peril;
E. Line 5:
Commercial multiple peril;
F. Line
9: Inland Marine;
G. Line 12:
Earthquake; and
H. Line 21: Auto
physical damage.
5.
Credit for reinsurance under section (6) of this rule shall apply only to
reinsurance contracts entered into or renewed on or after the effective date of
the certification of the assuming insurer. Any reinsurance contract entered
into prior to the effective date of the certification of the assuming insurer
that is subsequently amended after the effective date of the certification of
the assuming insurer, or a new reinsurance contract, covering any risk for
which collateral was provided previously, shall only be subject to section (6)
of this rule with respect to losses incurred and reserves reported from and
after the effective date of the amendment or new contract.
6. Nothing in section (6) of this rule shall
prohibit the parties to a reinsurance agreement from agreeing to provisions
establishing security requirements that exceed the minimum security
requirements established for certified reinsurers under section (6) of this
rule.
(B) Certification
Procedure.
1. The director shall post notice
on the department's website promptly upon receipt of any application for
certification, including instructions on how members of the public may respond
to the application. The director may not take final action on the application
until at least thirty (30) days after posting the notice required by paragraph
(6)(B)1. of this rule.
2. The
director shall issue written notice to an assuming insurer that has made
application and been approved as a certified reinsurer. Included in such notice
shall be the rating assigned the certified reinsurer in accordance with
subsection (6)(A) of this rule. The director shall publish a list of all
certified reinsurers and their ratings.
3. In order to be eligible for certification,
the assuming insurer shall meet the following requirements:
A. The assuming insurer must be domiciled and
licensed to transact insurance or reinsurance in a Qualified Jurisdiction, as
determined by the director pursuant to subsection (6)(C) of this
rule.
B. The assuming insurer must
maintain capital and surplus, or its equivalent, of no less than two hundred
fifty (250) million dollars calculated in accordance with subparagraph
(6)(B)4.H. of this rule. This requirement may also be satisfied by an
association including incorporated and individual unincorporated underwriters
having minimum capital and surplus equivalents (net of liabilities) of at least
two hundred fifty (250) million dollars and a central fund containing a balance
of at least two hundred fifty (250) million dollars.
C. The assuming insurer must maintain
financial strength ratings from two (2) or more rating agencies deemed
acceptable by the director. These ratings shall be based on interactive
communication between the rating agency and the assuming insurer and shall not
be based solely on publicly available information. These financial strength
ratings will be one (1) factor used by the director in determining the rating
that is assigned to the assuming insurer. Acceptable rating agencies include
the following: Standard & Poor's, Moody's Investors Service, Fitch Ratings,
A.M. Best Company, or any other nationally recognized statistical rating
organization.
D. The certified
reinsurer must comply with any other requirements reasonably imposed by the
director.
4. Each
certified reinsurer shall be rated on a legal entity basis, with due
consideration being given to the group rating where appropriate, except that an
association including incorporated and individual unincorporated underwriters
that has been approved to do business as a single certified reinsurer may be
evaluated on the basis of its group rating. Factors that may be considered as
part of the evaluation process include, but are not limited to, the following:
A. The certified reinsurer's financial
strength rating from an acceptable rating agency. The maximum rating that a
certified reinsurer may be assigned will correspond to its financial strength
rating as outlined in the table below. The director shall use the lowest
financial strength rating received from an approved rating agency in
establishing the maximum rating of a certified reinsurer. A failure to obtain
or maintain at least two (2) financial strength ratings from acceptable rating
agencies will result in loss of eligibility for certification-
Ratings
|
Best
|
S & P
|
Moody's
|
Fitch
|
Secure - 1
|
A++
|
AAA
|
Aaa
|
AAA
|
Secure - 2
|
A+
|
AA+, AA, AA-
|
Aa1, Aa2, Aa3
|
AA+, AA, AA-
|
Secure - 3
|
A
|
A+, A
|
A1, A2
|
A+, A
|
Secure - 4
|
A-
|
A-
|
A3
|
A-
|
Secure - 5
|
B++, B+
|
BBB+, BBB, BBB-
|
Baa1, Baa2, Baa3
|
BBB+, BBB, BBB-
|
Vulnerable - 6
|
B, B-, C++, C+, C, C-, D, E, F
|
BB+, BB, BB-, B+, B, B-, CCC, CC, C, D, R
|
Ba1, Ba2, Ba3, B1, B2, B3, Caa, Ca, C
|
BB+, BB, BB-, B+, B, B-, CCC+, CC, CCC-, DD
|
B.
The business practices of the certified reinsurer in dealing with its ceding
insurers, including its record of compliance with reinsurance contractual terms
and obligations;
C. For certified
reinsurers domiciled in the United States, a review of the most recent
applicable NAIC Annual Statement Blank, either Schedule F (for
property/casualty reinsurers) or Schedule S (for life and health
reinsurers);
D. For certified
reinsurers not domiciled in the United States, a review annually of the NAIC
Form CR-F (for property/casualty reinsurers) or Form CR-S (for life and health
reinsurers);
E. The reputation of
the certified reinsurer for prompt payment of claims under reinsurance
agreements, based on an analysis of ceding insurers' Schedule F reporting of
overdue reinsurance recoverables, including the proportion of obligations that
are more than ninety (90) days past due or are in dispute, with specific
attention given to obligations payable to companies that are in administrative
supervision or receivership;
F.
Regulatory actions against the certified reinsurer;
G. The report of the independent auditor on
the financial statements of the insurance enterprise, on the basis described in
subparagraph (6)(B)4.H. of this rule;
H. For certified reinsurers not domiciled in
the United States, audited financial statements, regulatory filings, and
actuarial opinion (as filed with the non-United States jurisdiction supervisor
with a translation in English). Upon the initial application for certification,
the director will consider audited financial statements for the last two (2)
years filed with its non-United States jurisdiction supervisor;
I. The liquidation priority of obligations to
a ceding insurer in the certified reinsurer's domiciliary jurisdiction in the
context of an insolvency proceeding;
J. A certified reinsurer's participation in
any solvent scheme of arrangement, or similar procedure, which involves United
States ceding insurers. The director shall receive prior notice from a
certified reinsurer that proposes participation by the certified reinsurer in a
solvent scheme of arrangement; and
K. Any other information deemed relevant by
the director.
5. Based on
the analysis conducted under subparagraph (6)(B)4.E. of this rule of a
certified reinsurer's reputation for prompt payment of claims, the director may
make appropriate adjustments in the security the certified reinsurer is
required to post to protect its liabilities to United States ceding insurers,
provided that the director shall, at a minimum, increase the security the
certified reinsurer is required to post by one (1) rating level under
subparagraph (6)(B)4.A. of this rule if the director finds that-
A. More than fifteen percent (15%) of the
certified reinsurer's ceding insurance clients have overdue reinsurance
recoverables on paid losses of ninety (90) days or more which are not in
dispute and which exceed one hundred thousand dollars ($100,000) for each
cedent; or
B. The aggregate amount
of reinsurance recoverables on paid losses which are not in dispute that are
overdue by ninety (90) days or more exceeds fifty (50) million
dollars.
6. The assuming
insurer must submit a properly executed Form CR-1, the form of which is
included herein as Exhibit 6 of this rule, revised September 23, 2013, or any
form which substantially comports with the specified form, as evidence of its
submission to the jurisdiction of this state, appointment of the director as an
agent for service of process in this state, and agreement 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. The director shall not
certify any assuming insurer that is domiciled in a jurisdiction that the
director has determined does not adequately and promptly enforce final United
States judgments or arbitration awards.
7. The certified reinsurer must agree to meet
applicable information filing requirements as determined by the director, both
with respect to an initial application for certification and on an ongoing
basis. The applicable information filing requirements are as follows:
A. Notification within ten (10) days of any
regulatory actions taken against the certified reinsurer, any change in the
provisions of its domiciliary license or any change in rating by an approved
rating agency, including a statement describing such changes and the reasons
therefore;
B. Annually, the NAIC
Form CR-F or CR-S, the forms of which are included herein as Exhibits 7 and 8,
respectively, of this rule, revised September 23, 2013, or any form which
substantially comports with the specified form as applicable;
C. Annually, the report of the independent
auditor on the financial statements of the insurance enterprise, on the basis
described in subparagraph (6)(B)7.D. of this rule;
D. Annually, audited financial statements,
regulatory filings, and actuarial opinion (as filed with the certified
reinsurer's supervisor with a translation in English). Upon the initial
certification, audited financial statements for the last two (2) years filed
with the certified reinsurer's supervisor;
E. At least annually, an updated list of all
disputed and overdue reinsurance claims regarding reinsurance assumed from
United States domestic ceding insurers;
F. A certification from the certified
reinsurer's domestic regulator that the certified reinsurer is in good standing
and maintains capital in excess of the jurisdiction's highest regulatory action
level;
G. Includes with the
documents required to be filed under preceding provisions of section (6) of
this rule the appropriate filing fees as set forth in section
374.230,
RSMo; and
H. Any other information
that the director may reasonably require.
8. The information required to be filed
pursuant to paragraph (6)(B)7. of this rule shall be deemed records which are
open to the inspection of the public in accordance with sections
374.070
and
610.011,
RSMo. Any insurance company claiming that such filings are trade secrets or
proprietary information shall comply with the procedures as set forth in
20 CSR
10-2.400(8).
9. Change in Rating or Revocation of
Certification.
A. In the case of a downgrade
by a rating agency or other disqualifying circumstance, the director shall,
upon written notice, assign a new rating to the certified reinsurer in
accordance with the requirements of subparagraph (6)(B)4.A. of this
rule.
B. The director shall have
the authority to suspend, revoke, or otherwise modify a certified reinsurer's
certification at any time, if the certified reinsurer fails to meet or maintain
its obligations or security requirements under section (6) of this rule, or if
other financial or operating results of the certified reinsurer, or documented
significant delays in payment by the certified reinsurer, lead the director to
reconsider the certified reinsurer's ability or willingness to meet its
contractual obligations.
C. If the
rating of a certified reinsurer is upgraded by the director, the certified
reinsurer may meet the security requirements applicable to its new rating on a
prospective basis, but the director shall require the certified reinsurer to
post security under the previously applicable security requirements as to all
contracts in force on or before the effective date of the upgraded rating. If
the rating of a certified reinsurer is downgraded by the director, the director
shall require the certified reinsurer to meet the security requirements
applicable to its new rating for all business it has assumed as a certified
reinsurer.
D. Upon revocation of
the certification of a certified reinsurer by the director, the assuming
insurer shall be required to post security in accordance with section (9) of
this rule in order for the ceding insurer to continue to take credit for
reinsurance ceded to the assuming insurer. If funds continue to be held in
trust in accordance with section (5) of this rule, the director may allow
additional credit equal to the ceding insurer's pro rata share of such funds,
discounted to reflect the risk of uncollectibility and anticipated expenses of
trust administration. Notwithstanding the change of a certified reinsurer's
rating or revocation of its certification, a domestic insurer that has ceded
reinsurance to that certified reinsurer may not be denied credit for
reinsurance for a period of three (3) months for all reinsurance ceded to that
certified reinsurer, unless the reinsurance is found by the director to be at
high risk of uncollectibility.
(C) Qualified Jurisdictions.
1. If, upon conducting an evaluation under
section (6) of this rule with respect to the reinsurance supervisory system of
any non-United States assuming insurer, the director determines that the
jurisdiction qualifies to be recognized as a qualified jurisdiction, the
director shall publish notice and evidence of such recognition in an
appropriate manner. The director may establish a procedure to withdraw
recognition of those jurisdictions that are no longer qualified.
2. 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 director shall evaluate the
reinsurance supervisory system of the non-United States 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. The director shall
determine the appropriate approach for evaluating the qualifications of such
jurisdictions, and create and publish a list of jurisdictions whose reinsurers
may be approved by the director as eligible for certification. A qualified
jurisdiction must agree to share information and cooperate with the director
with respect to all certified reinsurers domiciled within that jurisdiction.
Additional factors to be considered in determining whether to recognize a
qualified jurisdiction, in the discretion of the director, include, but are not
limited to, the following:
A. The framework
under which the assuming insurer is regulated;
B. The structure and authority of the
domiciliary regulator with regard to solvency regulation requirements and
financial surveillance;
C. The
substance of financial and operating standards for assuming insurers in the
domiciliary jurisdiction;
D. The
form and substance of financial reports required to be filed or made publicly
available by reinsurers in the domiciliary jurisdiction and the accounting
principles used;
E. The domiciliary
regulator's willingness to cooperate with United States regulators in general
and the director in particular;
F.
The history of performance by assuming insurers in the domiciliary
jurisdiction;
G. Any documented
evidence of substantial problems with the enforcement of final United States
judgments in the domiciliary jurisdiction. A jurisdiction will not be
considered to be a qualified jurisdiction if the director has determined that
it does not adequately and promptly enforce final United States judgments or
arbitration awards;
H. Any relevant
international standards or guidance with respect to mutual recognition of
reinsurance supervision adopted by the International Association of Insurance
Supervisors or successor organization; and
I. Any other matters deemed relevant by the
director.
3. A list of
qualified jurisdictions shall be published through the NAIC Committee Process.
The director may consider this list in determining qualified jurisdictions. If
the director approves a jurisdiction as qualified that does not appear on the
list of qualified jurisdictions, the director shall provide thoroughly
documented justification with respect to the criteria provided under subsection
(6)(C) of this rule.
4. United
States jurisdictions that meet the requirements for accreditation under the
NAIC financial standards and accreditation program shall be recognized as
qualified jurisdictions.
(D) Recognition of Certification Issued by an
NAIC Accredited Jurisdiction
1. If an
applicant for certification has been certified as a reinsurer in an
NAIC-accredited jurisdiction, the director has the discretion to defer to that
jurisdiction's certification, and to defer to the rating assigned by that
jurisdiction, if the assuming insurer submits a properly executed Form CR-1,
the form of which is included herein as Exhibit 6 of this rule, revised
September 23, 2013, or any form which substantially comports with the specified
form, and such additional information as the director requires. The assuming
insurer shall be considered to be a certified reinsurer in this
state.
2. Any change in the
certified reinsurer's status or rating in the other jurisdiction shall apply
automatically in this state as of the date it takes effect in the other
jurisdiction. The certified reinsurer shall notify the director of any change
in its status or rating within ten (10) days after receiving notice of the
change.
3. The director may
withdraw recognition of the other jurisdiction's rating at any time and assign
a new rating in accordance with subparagraph (6)(B)7.A. of this rule.
4. The director may withdraw recognition of
the other jurisdiction's certification at any time, with written notice to the
certified reinsurer. Unless the director suspends or revokes the certified
reinsurer's certification in accordance with subparagraph (6)(B)7.B. of this
rule, the certified reinsurer's certification shall remain in good standing in
this state for a period of three (3) months, which shall be extended if
additional time is necessary to consider the assuming insurer's application for
certification in this state.
(E) Mandatory Funding Clause. In addition to
the clauses required under section (13) of this rule, reinsurance contracts
entered into or renewed under section (6) of this rule shall include a proper
funding clause, which requires the certified reinsurer to provide and maintain
security in an amount sufficient to avoid the imposition of any financial
statement penalty on the ceding insurer under section (6) of this rule for
reinsurance ceded to the certified reinsurer.
(F) The director shall comply with all
reporting and notification requirements that may be established by the NAIC
with respect to certified reinsurers and qualified jurisdictions.
(7) Credit for
Reinsurance-Reciprocal Jurisdictions.
(A)
Pursuant to section 375.246.1(6), RSMo, the director 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
regulation.
(B) A "Reciprocal
Jurisdiction" is a jurisdiction, as designated by the director pursuant to
subsection (7)(D) of this rule, 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.
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 U.S. jurisdiction that meets the
requirements for accreditation under the NAIC financial standards and
accreditation program; or
3. A
qualified jurisdiction, as determined by the director pursuant to section
375.246.1(5), RSMo and subsection (6)(C) of this rule, which is not otherwise
described in subparagraph (7)(B)1. or (7)(B)2. of this rule and which the
director 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 director 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; and
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 director in
accordance with a memorandum of understanding or similar document between the
director 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 conditions set forth
below-
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 paragraph
(7)(C)7. of this rule according to the methodology of its domiciliary
jurisdiction, in the following amounts:
A. No
less than $250 million; or
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 $250 million; and
(II) A central fund containing a balance of
the equivalent of at least $250 million;
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 paragraph (7)(B)1. of this rule, the ratio specified in the
applicable covered agreement;
B. If
the assuming insurer is domiciled in a reciprocal jurisdiction as defined in
paragraph (7)(B)2. of this rule, 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; or
C. If the assuming insurer is domiciled in a
reciprocal jurisdiction as defined in paragraph (7)(B)3. of this rule, after
consultation with the reciprocal jurisdiction and considering any
recommendations published through the NAIC Committee Process, such solvency or
capital ratio as the director 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, the form of which is included herein as Exhibit 9 of this
rule, of its agreement to the following:
A.
The assuming insurer must agree to provide prompt written notice and
explanation to the director if it falls below the minimum requirements set
forth in paragraphs (7)(B)2. or 3. of this rule, 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 director as agent for service of process.
(I) The director may also require that such
consent be provided and included in each reinsurance agreement under the
director's jurisdiction.
(II)
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;
C. 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;
D. 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;
E. 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 director 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 section
375.246.1(5) and section 375.246.2, RSMo, 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;
and
F. The assuming insurer must
agree in writing to meet the applicable information filing requirements as set
forth in paragraph (7)(C)5. of this rule;
5. The assuming insurer or its legal
successor must provide, if requested by the director, on behalf of itself and
any legal predecessors, the following documentation to the director:
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; and
D. Prior to
entry into the reinsurance agreement and not more than semi-annually
thereafter, information regarding the assuming insurer's assumed reinsurance by
the 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 paragraph (7)(C)6. of this
rule;
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 director;
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; or
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 $50 million or as otherwise specified in a covered
agreement;
7. The
assuming insurer's supervisory authority must confirm to the director on an
annual basis that the assuming insurer complies with the requirements set forth
in paragraphs (7)(C)2. and 3. of this rule; and
8. Nothing in this provision precludes an
assuming insurer from providing the director with information on a voluntary
basis.
(D) The director
shall timely create and publish a list of reciprocal jurisdictions.
1. A list of reciprocal jurisdictions is
published through the NAIC Committee Process. The director's list shall include
any reciprocal jurisdiction as defined under paragraphs (7)(B)1. and 2. of this
rule, and shall consider any other reciprocal jurisdiction included on the NAIC
list. The director 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 director 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, regulation, or in
accordance with a process published through the NAIC
Committee Process, except
that the director shall not remove from the list a reciprocal jurisdiction as
defined under paragraphs (7)(B)1. and 2. of this rule. 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 section
375.246,
RSMo, or 20 CSR
200-2.100.
(E) The director 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 subsection.
1. If an
NAIC-accredited jurisdiction has determined that the conditions set forth in
subsection (7)(C) of this rule have been met, the director 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 director may accept financial
documentation filed with another NAIC-accredited jurisdiction or with the NAIC
in satisfaction of the requirements of subsection (7)(C) of this
rule.
2. When requesting that the
director defer to another NAIC-accredited jurisdiction's determination, an
assuming insurer must submit a properly executed Form RJ-1 and additional
information as the director 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
director determines that an assuming insurer no longer meets one (1) or more of
the requirements under this subsection, the director may revoke or suspend the
eligibility of the assuming insurer for recognition under this subsection.
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).
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 director 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 (7)(F) of this rule or adopting any similar requirement
that will have substantially the same regulatory impact as security, the
director 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 of the conditions listed in
subsection (7)(C) of this rule;
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 paragraph (7)(G)2. of
this rule, if the director determines that no or insufficient action was taken
by the assuming insurer, the director 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.
(8) Credit for Reinsurance
Required by Law. Pursuant to section 375.246.1, RSMo, the director shall allow
credit for reinsurance ceded by a domestic insurer to an assuming insurer not
meeting the requirements of section 375.246.1(1), (2), (3), (4), (5), or (6),
RSMo, but only as to the insurance of risks located in jurisdictions where the
reinsurance is required by the applicable law or regulation of that
jurisdiction. As used in this section, "jurisdiction" means state, district, or
territory of the United States and any lawful national government.
(9) Asset or Reduction From Liability for
Reinsurance Ceded to an Unauthorized Assuming Insurer not Meeting the
Requirements of Sections (2) through (8) of this Rule.
(A) Pursuant to section 375.246.2., RSMo, 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
375.246.1., RSMo, 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 such assuming
insurer as security for the payment of obligations under the reinsurance
contract. The security shall be held in the United States 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 United States financial institution as
defined in section 375.246.3(2), RSMo. This security may be in the form of any
of the following:
1. Cash;
2. Securities listed by the Securities
Valuation Office of the NAIC, including those deemed exempt from filing as
defined by the Purpose and Procedures Manual of the Securities Valuation
Office, and qualifying as admitted assets;
3. Clean, irrevocable, unconditional, and
"evergreen" letters of credit issued or confirmed by a qualified United States
institution, as defined in section 375.246.3(1), RSMo, effective no later than
December 31 of the year for which filing is being made, and in the possession
of, or in trust for, the ceding insurer on or before the filing date of its
annual 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; or
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 section (9) of this rule shall be
allowed only when the requirements of section (13) and the applicable portions
of sections (10), (11), or (12) of this rule have been satisfied.
(10) Trust Agreements
Qualified Under Section (9).
(A) As used in
section (10) of this rule-
1. "Beneficiary"
means the entity for whose sole benefit the trust has been established and any
successor of the beneficiary by operation of law. If a court of law appoints a
successor in interest to the named beneficiary, then the named beneficiary
includes, and is limited to, the court-appointed domiciliary receiver
(including conservator, rehabilitator, or liquidator);
2. "Grantor" means the entity that has
established a trust for the sole benefit of the beneficiary. When established
in conjunction with a reinsurance agreement, the grantor is the unlicensed,
unaccredited assuming insurer; and
3. "Obligations," as used in paragraph
(10)(B)11. of this rule, means-
A. Reinsured
losses and allocated loss expenses paid by the ceding company, but not
recovered from the assuming insurer;
B. Reserves for reinsured losses reported and
outstanding;
C. Reserves for
reinsured losses incurred but not reported; and
D. Reserves for allocated reinsured loss
expenses and unearned premiums.
(B) Required Conditions.
1. The trust agreement shall be entered into
between the beneficiary, the grantor, and a trustee, which shall be a qualified
United States financial institution as defined in section 375.246.3(2),
RSMo.
2. The trust agreement shall
create a trust account into which assets shall be deposited.
3. All assets in the trust account shall be
held by the trustee at the trustee's office in the United States.
4. The trust agreement shall provide that-
A. The beneficiary shall have the right to
withdraw assets from the trust account at any time, without notice to the
grantor, subject only to written notice from the beneficiary to the
trustee;
B. No other statement or
document is required to be presented in order to withdraw assets, except that
the beneficiary may be required to acknowledge receipt of withdrawn
assets;
C. It is not subject to any
conditions or qualifications outside of the trust agreement; and
D. It shall not contain references to any
other agreements or documents except as provided for in paragraphs (10)(B)11.
and (10)(B)12. of this rule.
5. The trust agreement shall be established
for the sole benefit of the beneficiary.
6. The trust agreement shall require the
trustee to-
A. Receive assets and hold all
assets in a safe place;
B.
Determine that all assets are in the form that the beneficiary, or the trustee
upon direction by the beneficiary, may whenever necessary negotiate any such
assets, without consent or signature from the grantor or any other person or
entity;
C. Furnish to the grantor
and the beneficiary a statement of all assets in the trust account upon its
inception and at intervals no less frequent than the end of each calendar
quarter;
D. Notify the grantor and
the beneficiary within ten (10) days of any deposits to or withdrawals from the
trust account;
E. Upon written
demand of the beneficiary, immediately take any and all steps necessary to
transfer absolutely and unequivocally all right, title, and interest in the
assets held in the trust account to the beneficiary and deliver physical
custody of these assets to the beneficiary; and
F. Allow no substitutions or withdrawals of
assets from the trust account, except on written instructions from the
beneficiary, except that the trustee may, without the consent of but with
notice to the beneficiary, upon call or maturity of any trust asset withdraw
such asset upon condition that the proceeds are paid into the trust
account.
7. The trust
agreement shall provide that at least thirty (30) days, but not more than
forty-five (45) days, prior to termination of the trust account, written
notification of termination shall be delivered by the trustee to the
beneficiary.
8. The trust agreement
shall be made subject to and governed by the laws of the state in which the
trust is domiciled.
9. The trust
agreement shall prohibit invasion of the trust corpus for the purpose of paying
commission to, or reimbursing the expenses of, the trustee. In order for a
letter of credit to qualify as an asset of the trust, the trustee shall have
the right and the obligation pursuant to the deed of trust or some other
binding agreement (as duly approved by the director), to immediately draw down
the full amount of the letter of credit and hold the proceeds in trust for the
beneficiaries of the trust if the letter of credit will otherwise expire
without being renewed or replaced.
10. The trust agreement shall provide that
the trustee shall be liable for its negligence, willful misconduct, or lack of
good faith. The failure of the trustee to draw against the letter of credit in
circumstances where such draw would be required shall be deemed to be
negligence and/or willful misconduct.
11. Notwithstanding other provisions of this
rule, when a trust agreement is established in conjunction with a reinsurance
agreement covering risks other than life, annuities, and accident and health,
where it is customary practice to provide a trust agreement for a specific
purpose, the trust agreement may provide that the ceding insurer shall
undertake to use and apply amounts drawn upon the trust account, without
diminution because of the insolvency of the ceding insurer or the assuming
insurer, only for the following purposes:
A.
To pay or reimburse the ceding insurer for the assuming insurer's share under
the specific reinsurance agreement regarding any losses and allocated loss
expenses paid by the ceding insurer, but not recovered from the assuming
insurer, or for unearned premiums due to the ceding insurer if not otherwise
paid by the assuming insurer;
B. To
make payment to the assuming insurer of any amounts held in the trust account
that exceed one hundred two percent (102%) of the actual amount required to
fund the assuming insurer's obligations under the specific reinsurance
agreement; or
C. Where the ceding
insurer has received notification of termination of the trust account and where
the assuming insurer's entire obligations under the specific reinsurance
agreement remain unliquidated and undischarged ten (10) days prior to that
termination date, to withdraw amounts equal to those obligations and deposit
those amounts in a separate account, in the name of the ceding insurer in any
qualified United States financial institution as defined in section
375.246.3(2), RSMo, apart from its general assets, in trust for those uses and
purposes specified in subparagraphs (10)(B)11.A. and B. of this rule as may
remain executory after such withdrawal and for any period after the termination
date.
12. Notwithstanding
other provisions of this rule, when a trust agreement is established to meet
the requirements of section (9) of this rule in conjunction with a reinsurance
agreement covering life, annuities, or accident and health risks, where it is
customary to provide a trust agreement for a specific purpose, the trust
agreement may provide that the ceding insurer shall undertake to use and apply
amounts drawn upon the trust account, without diminution because of the
insolvency of the ceding insurer or the assuming insurer, only for the
following purposes:
A. To pay or reimburse the
ceding insurer for-
(I) The assuming
insurer's share under the specific reinsurance agreement of premiums returned,
but not yet recovered from the assuming insurer, to the owners of policies
reinsured under the reinsurance agreement on account of cancellations of the
policies; and
(II) The assuming
insurer's share under the specific reinsurance agreement of surrenders and
benefits or losses paid by the ceding insurer, but not yet recovered from the
assuming insurer, under the terms and provisions of the policies reinsured
under the reinsurance agreement;
B. To pay to the assuming insurer amounts
held in the trust account in excess of the amount necessary to secure the
credit or reduction from liability for reinsurance taken by the ceding insurer;
or
C. Where the ceding insurer has
received notification of termination of the trust and where the assuming
insurer's entire obligations under the specific reinsurance agreement remain
unliquidated and undischarged ten (10) days prior to the termination date, to
withdraw amounts equal to the assuming insurer's share of liabilities, to the
extent that the liabilities have not yet been funded by the assuming insurer,
and deposit those amounts in a separate account, in the name of the ceding
insurer in any qualified United States financial institution apart from its
general assets, in trust for the uses and purposes specified in subparagraphs
(10)(B)12.A. and (10)(B)12.B. of this rule as may remain executory after
withdrawal and for any period after the termination date.
13. Either the reinsurance agreement or the
trust agreement must stipulate that assets deposited in the trust account shall
be valued according to their current fair market value and shall consist only
of cash in United States dollars, certificates of deposit issued by a United
States bank and payable in United States dollars, and investments permitted by
the Insurance Code or any combination of the above, provided investments in or
issued by an entity controlling, controlled by, or under common control with
either the grantor or the beneficiary of the trust shall not exceed five
percent (5%) of total investments. The agreement may further specify the types
of investments to be deposited. If the reinsurance agreement covers life,
annuities, or accident and health risks, then the provisions required by
paragraph (10)(B)13. of this rule must be included in the reinsurance
agreement.
(C) Permitted
Conditions.
1. The trust agreement may
provide that the trustee may resign upon delivery of a written notice of
resignation, effective not less than ninety (90) days after the beneficiary and
grantor receive the notice and that the trustee may be removed by the grantor
by delivery to the trustee and the beneficiary of a written notice of removal,
effective not less than ninety (90) days after the trustee and the beneficiary
receive the notice, provided that no such resignation or removal shall be
effective until a successor trustee has been duly appointed and approved by the
beneficiary and the grantor and all assets in the trust have been duly
transferred to the new trustee.
2.
The grantor may have the full and unqualified right to vote any shares of stock
in the trust account and to receive from time-to-time payments of any dividends
or interest upon any shares of stock or obligations included in the trust
account. Any interest or dividends either shall be forwarded promptly upon
receipt to the grantor or deposited in a separate account established in the
grantor's name.
3. The trustee may
be given authority to invest, and accept substitutions of, any funds in the
account, provided that no investment or substitution shall be made without
prior approval of the beneficiary, unless the trust agreement specifies
categories of investments acceptable to the beneficiary and authorizes the
trustee to invest those funds and to accept substitutions that the trustee
determines are at least equal in current fair market value to the assets
withdrawn and that are consistent with the restrictions in subparagraph
(10)(D)1.B. of this rule.
4. The
trust agreement may provide that the beneficiary may at any time designate a
party to which all or part of the trust assets are to be transferred. Transfer
may be conditioned upon the trustee receiving, prior to or simultaneously,
other specified assets.
5. The
trust agreement may provide that, upon termination of the trust account, all
assets not previously withdrawn by the beneficiary shall, with written approval
by the beneficiary, be delivered over to the grantor.
(D) Additional Conditions Applicable to
Reinsurance Agreements.
1. A reinsurance
agreement may contain provisions that-
A.
Require the assuming insurer to enter into a trust agreement and to establish a
trust account for the benefit of the ceding insurer, and specifying what the
agreement is to cover;
B. Require
the assuming insurer, prior to depositing assets with the trustee, to execute
assignments or endorsements in blank, or to transfer legal title to the trustee
of all shares, obligations, or any other assets requiring assignments, in order
that the ceding insurer, or the trustee upon the direction of the ceding
insurer, may whenever necessary negotiate these assets without consent or
signature from the assuming insurer or any other entity;
C. Require that all settlements of account
between the ceding insurer and the assuming insurer be made in cash or its
equivalent; and
D. Stipulate that
the assuming insurer and the ceding insurer agree that the assets in the trust
account, established pursuant to the provisions of the reinsurance agreement,
may be withdrawn by the ceding insurer at any time, notwithstanding any other
provisions in the reinsurance agreement, and shall be utilized and applied by
the ceding insurer or its successors in interest by operation of law,
including, without limitation, any liquidator, rehabilitator, receiver, or
conservator of such company, without diminution because of insolvency on the
part of the ceding insurer or the assuming insurer, only for the following
purposes:
(I) To pay or reimburse the ceding
insurer for the assuming insurer's share under the specific reinsurance
agreement of premiums returned, but not yet recovered from the assuming
insurer, to the owners of policies reinsured under the reinsurance agreement
because of cancellation of such policies;
(II) To pay or reimburse the ceding insurer
for the assuming insurer's share of surrenders and benefits or losses paid by
the ceding insurer pursuant to the provisions of the policies reinsured under
the reinsurance agreement;
(III) To
pay or reimburse the ceding insurer for any other amounts necessary to secure
the credit or reduction from liability for reinsurance taken by the ceding
insurer; and
(IV) To make payment
to the assuming insurer of amounts held in the trust account in excess of the
amount necessary to secure the credit or reduction from liability for
reinsurance taken by the ceding insurer.
2. The reinsurance agreement also may contain
provisions that-
A. Give the assuming insurer
the right to seek approval from the ceding insurer, which shall not be
unreasonably or arbitrarily withheld, to withdraw from the trust account all or
any part of the trust assets and transfer those assets to the assuming insurer,
provided-
(I) The assuming insurer shall, at
the time of that withdrawal, replace the withdrawn assets with other qualified
assets having a current fair market value equal to the market value of the
assets withdrawn so as to maintain at all times the deposit in the required
amount; or
(II) After withdrawal
and transfer, the current fair market value of the trust account is no less
than one hundred two percent (102%) of the required amount;
B. Provide for the return of any
amount withdrawn in excess of the actual amounts required for parts
(10)(D)1.D.(I)-(IV) of this rule, and for interest payments at a rate not in
excess of the prime rate of interest on such amounts;
C. Permit the award by any arbitration panel
or court of competent jurisdiction of-
(I)
Interest at a rate different from that provided in subparagraph (10)(D)2.B. of
this rule;
(II) Court or
arbitration costs;
(III) Attorney's
fees; and
(IV) Any other reasonable
expenses.
(E) Financial reporting. A trust agreement
may be used to reduce any liability for reinsurance ceded to an unauthorized
assuming insurer in financial statements required to be filed with this
department in compliance with the provisions of this rule when established on
or before the date of filing of the financial statement of the ceding insurer.
Further, the reduction for the existence of an acceptable trust account may be
up to the current fair market value of acceptable assets available to be
withdrawn from the trust account at that time, but such reduction shall be no
greater than the specific obligations under the reinsurance agreement that the
trust account was established to secure.
(F) Existing agreements. Notwithstanding the
effective date of this rule, any trust agreement or underlying reinsurance
agreement in existence prior to January 1, 2013, will continue to be acceptable
until December 31, 2013, at which time the agreements will have to be in full
compliance with this rule for the trust agreement to be acceptable.
(G) The failure of any trust agreement to
specifically identify the beneficiary as defined in subsection (10)(A) of this
rule shall not be construed to affect any actions or rights which the director
may take or possess pursuant to the provisions of the laws of this state.
(11) Letters of Credit
Qualified Under Section (9).
(A) The letter of
credit must be clean, irrevocable, unconditional and issued or confirmed by a
qualified United States financial institution as defined in section
375.246.3(1), RSMo. The letter of credit shall contain an issue date and
expiration date and shall stipulate that the beneficiary need only draw a sight
draft under the letter of credit and present it to obtain funds and that no
other document need be presented. The letter of credit also shall indicate that
it is not subject to any condition or qualifications outside of the letter of
credit. In addition, the letter of credit itself shall not contain reference to
any other agreements, documents or entities, except as provided in paragraph
(11)(H)1. of this rule. As used in section (11) of this rule, "beneficiary"
means the domestic insurer for whose benefit the letter of credit has been
established and any successor of the beneficiary by operation of law. If a
court of law appoints a successor in interest to the named beneficiary, then
the named beneficiary includes, and is limited to, the court-appointed
domiciliary receiver (including conservator, rehabilitator, or
liquidator).
(B) The heading of the
letter of credit may include a boxed section which contains the name of the
applicant and other appropriate notations to provide a reference for the letter
of credit. The boxed section shall be clearly marked to indicate that such
information is for internal identification purposes only.
(C) The letter of credit shall contain a
statement to the effect that the obligation of the qualified United States
financial institution under the letter of credit is in no way contingent upon
reimbursement with respect thereto.
(D) The term of the letter of credit shall be
for at least one (1) year and shall contain an "evergreen clause" that prevents
the expiration of the letter of credit without due notice from the issuer. The
"evergreen clause" shall provide for a period of no less than thirty (30) days'
notice prior to expiration date or nonrenewal.
(E) The letter of credit shall state whether
it is subject to and governed by the laws of this state or the Uniform Customs
and Practice for Documentary Credits of the International Chamber of Commerce
(Publication 600) (UCP 600) or International Standby Practices of the
International Chamber of Commerce Publication 590 (ISP98), or any successor
publication, and all drafts drawn thereunder shall be presentable at an office
in the United States of a qualified United States financial
institution.
(F) If the letter of
credit is made subject to the Uniform Customs and Practice for Documentary
Credits of the International Chamber of Commerce (Publication 500), or any
successor publication, then the letter of credit shall specifically address and
provide for an extension of time to draw against the letter of credit in the
event that one (1) or more of the occurrences specified in Article 17 of
Publication 500 or any other successor publication, occur.
(G) If the letter of credit is issued by a
financial institution authorized to issue letters of credit, other than a
qualified United States financial institution as described in subsection
(11)(A) of this rule, then the following additional requirements shall be met:
1. The issuing financial institution shall
formally designate the confirming qualified United States financial institution
as its agent for the receipt and payment of the drafts; and
2. The "evergreen clause" shall provide for
thirty (30) days' notice prior to expiration date for nonrenewal.
(H) Reinsurance Agreement
Provisions.
1. The reinsurance agreement in
conjunction with which the letter of credit is obtained may contain provisions
that-
A. Require the assuming insurer to
provide letters of credit to the ceding insurer and specify what they are to
cover;
B. Stipulate that the
assuming insurer and ceding insurer agree that the letter of credit provided by
the assuming insurer pursuant to the provisions of the reinsurance agreement
may be drawn upon at any time, notwithstanding any other provisions in the
agreement, and shall be utilized by the ceding insurer or its successors in
interest only for one (1) or more of the following reasons:
(I) To pay or reimburse the ceding insurer
for the assuming insurer's share under the specific reinsurance agreement of
premiums returned, but not yet recovered from the assuming insurers, to the
owners of policies reinsured under the reinsurance agreement on account of
cancellations of those policies;
(II) To pay or reimburse the ceding insurer
for the assuming insurer's share, under the specific reinsurance agreement, of
surrenders and benefits or losses paid by the ceding insurer, but not yet
recovered from the assuming insurers, under the terms and provisions of the
policies reinsured under the reinsurance agreement;
(III) To pay or reimburse the ceding insurer
for any other amounts necessary to secure the credit or reduction from
liability for reinsurance taken by the ceding insurer; and
(IV) Where the letter of credit will expire
without renewal or be reduced or replaced by a letter of credit for a reduced
amount and where the assuming insurer's entire obligations under the
reinsurance agreement remain unliquidated and undischarged ten (10) days prior
to the termination date, to withdraw amounts equal to the assuming insurer's
share of the liabilities, to the extent that the liabilities have not yet been
funded by the assuming insurer and exceed the amount of any reduced or
replacement letter of credit, and deposit those amounts in a separate account
in the name of the ceding insurer in a qualified United States financial
institution apart from its general assets, in trust for such uses and purposes
specified in part (11)(H)1.B.(I) of this rule as may remain after withdrawal
and for any period after the termination date.
C. All of the provisions of paragraph
(11)(H)1. of this rule shall be applied without diminution because of
insolvency on the part of the ceding insurer or assuming insurer.
2. Nothing contained in paragraph
(11)(H)1. of this rule shall preclude the ceding insurer and assuming insurer
from providing for-
A. An interest payment, at
a rate not in excess of the prime rate of interest, on the amounts held
pursuant to part (11)(H)1.B.(III) of this rule; or
B. The return of any amounts drawn down on
the letters of credit in excess of the actual amounts required for the above or
any amounts that are subsequently determined not to be due.
(12) Other
Security. A ceding insurer may take credit for unencumbered funds withheld by
the ceding insurer in the United States subject to withdrawal solely by the
ceding insurer and under its exclusive control.
(13) Reinsurance Contract. Credit will not be
granted, nor an asset or reduction from liability allowed, to a ceding insurer
for reinsurance effected with assuming insurers meeting the requirements of
sections (2), (3), (4), (5), (6), or (9) of this rule or otherwise in
compliance with section 375.246.1., RSMo, after the adoption of this rule
unless the reinsurance agreement includes:
(A)
A proper insolvency clause which stipulates that reinsurance is payable
directly to the liquidator or successor without diminution regardless of the
status of the ceding company consistent with section 375.246.5(2), RSMo, or is
substantially similar to the following:
1. In
the event of the insolvency of the company, this reinsurance shall be payable
directly to the ceding company, or to its liquidator, receiver, conservator, or
statutory successor on the basis of the liability of the company without
diminution because of the liquidator, receiver, conservator, or statutory
successor of the company has failed to pay all or a portion of any claim.
However, the liquidator, receiver, conservator, or statutory successor of the
company shall give written notice to the reinsurers of the pendency of a claim
against the company indicating the policy or bond reinsurance which claim would
involve a possible liability on the part of the reinsurers within a reasonable
time after that claim is filed in the conservation or liquidation proceeding or
in the receivership, and that during the pendency of that claim the reinsurers
may investigate that claim and interpose, at their own expense, in the
proceeding where that claim is to be adjudicated any defense(s) they may deem
available to the company or its liquidator, receiver, conservator, or statutory
successor. This expense incurred by the reinsurers shall be chargeable, subject
to the approval of the court, against the company as part of the expense of
conservation or liquidation to the extent of a pro rata share of the benefit
which may accrue to the company solely as a result of the defense undertaken by
the reinsurers;
2. Where two (2) or
more reinsurers are involved in the same claim and a majority in interest elect
to interpose defense to that claim, the expense shall be apportioned in
accordance with the terms of the reinsurance agreement as though that expense
had been incurred by the company; and
3. This insolvency clause shall not preclude
the reinsurer from asserting any excuse or defense to payment of this
reinsurance other than the excuses or defenses of the insolvency of the company
and the failure of the company's liquidator, receiver, conservator, or
statutory successor to pay all or a portion of any claim;
(B) A provision pursuant to section
375.246.1(8), RSMo, whereby the assuming insurer, if an unauthorized assuming
insurer has submitted to the jurisdiction of an alternative dispute resolution
panel or court of competent jurisdiction within the United States, has agreed
to comply with all requirements necessary to give that court or panel
jurisdiction, has designated an agent upon whom service of process may be
effected, and has agreed to abide by the final decision of that court or panel;
and
(C) A proper reinsurance
intermediary clause, if applicable, which stipulates that the credit risk for
the intermediary is carried by the assuming insurer.
(14) Contracts Affected. All new and renewal
reinsurance transactions entered into after January 1, 2022, shall conform to
the requirements of the Act and this rule if credit is to be given to the
ceding insurer for such reinsurance.
EXHIBIT 1
Reinsurer Application
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EXHIBIT 2
Appointment of Director to Acknowledge or
Receive Service of Process
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COPY or RESOLUTION
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EXHIBITS 3
FORMAR-1
Certificate of Assuming Accredited
Insurer
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EXHIBIT 4
BIOGRAPHICAL AFFIDAVIT
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BIOGRAPHICAL, AFFTDAVT Supplemental Personal
Information
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EXHIBIT 5
Form AR-2
Certificate of Assuming Insurer
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EXHIBIT 6
Form CR-1
Certificate of Certified Reinsurer
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EXHIBIT 7
Form CR-F-PART 1
Assumed Reinsurance as of December 31, Current Year (000
Omitted)
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FormCR-F-PART2
Ceded Reinsurance as of December 31, Current Tear (000
Omitted)
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EXHIBIT 8
Form CR-S - PART 1 - SECTION 1
Reinsuraace Assumed Life Insurance, Annuities, Deposit Funds
and Other Liabilities Without Life or Disability Contingencies, and Related
Benefits Listed by Reinsured Company as of December 31, Current Year
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Form CR - PART 1 - SECTION 2 Reinsurance Assumed Accident and
Health Insurance Listed by Reinsured Company as of December 31, Current
Year
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Form CR-S- PART 2 Reinsuraace Recoverable on Paid and Unpaid
Losses Listed by Reinsuring Company as of December 31, Current Year
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Form CR-S - PART 3 - SECTION 1
Reinsurance Ceded Life Insurance, Annuities. Deposit Funds
and Other Liabilities Without Life or Disabilily Contingencies, and Related
Benefits Listed by Reinsuring Company as of December 31, Current Year
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Form CR-S - PAKT 3 - SECTION 2 Reinsurance Ceded Accident and
Health Insurance Listed by Reinsuring Company as of December 31, Current
Year
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EXHIBIT 9 FORM RJ-1
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