Current through Register Vol. 60, No. 12, December 1, 2021
(1) Except with the
prior written approval of the Authority, a CCO may not reinsure risks written
or insured by other CCOs or other insurers.
(2) A CCO may cede and reinsure risks, on an
indemnity reinsurance basis, to another CCO authorized to transact such
business in this state or with a health insurer authorized to reinsure such
risks provided that such other CCO or such other health insurer has been
approved or accepted by the Authority to act as a reinsurer of the CCO and the
reinsurance qualifies for financial statement credit to the cedent CCO under
this section. The Authority shall not approve or accept any such reinsurance by
the cedent CCO in an unauthorized CCO or unauthorized health insurer, or which
the Authority finds for good cause would otherwise be contrary to the interests
of the Members of the cedent CCO.
(3) Credit shall not be allowed, as an asset
or as a deduction from liability, to any cedent CCO for reinsurance unless the
reinsurance contract provides, in substance, that in the event of the
insolvency of the cedent CCO, the reinsurance shall be payable on the basis of
reported claims allowed by the court hearing the liquidation proceeding,
without diminution because of the insolvency of the cedent CCO. Such payments
shall be made directly to the cedent CCO or to its domiciliary liquidator
except when the reinsurer, with the consent of the Authority, has assumed the
policy obligations of the cedent CCO as direct obligations of the reinsurer and
in substitution for the obligations of the cedent CCO.
(4) For the purposes of subsection (3) of
this section, the reinsurance agreement may provide that the domiciliary
liquidator of the insolvent cedent CCO shall, within a reasonable time after
the claim is filed in the liquidation proceeding, give written notice to the
reinsurer of the pendency of a claim against the cedent CCO on the risk
reinsured. During the pendency of the claim, the reinsurer may investigate the
claim and interpose, at its own expense, in the proceeding in which the claim
is to be adjudicated any defenses that the reinsurer determines to be available
to the cedent CCO or its liquidator. The reinsurer's expense in doing so may be
filed as a claim against the insolvent cedent CCO to the extent of a
proportionate share of the benefit that may accrue to the cedent CCO solely as
a result of the defense undertaken by the reinsurer. When two or more
reinsurers are involved in the same claim and a majority in interest elect to
interpose one or more defenses to the claim, the expense shall be apportioned
in accordance with the terms of the reinsurance agreement as though the expense
had been incurred by the cedent CCO.
(5) The Authority may disallow financial
statement credit for reinsurance that would otherwise be allowed if the
Authority determines that allowing credit would be contrary to accurate
financial reporting or proper financial management or may be hazardous to
Members of the CCO or the public generally.
(6) A cedent CCO promptly shall inform the
Authority in writing of the cancellation of, or any other material change to,
any of its reinsurance agreements or arrangements.