The reinsurance is ceded to an assuming
insurer that has been certified by the commissioner as a reinsurer in this
state and secures its obligations in accordance with the requirements of this
In order to be eligible for
certification, the assuming insurer shall meet the following requirements:
1. The assuming insurer shall be domiciled
and licensed to transact insurance or reinsurance in a qualified jurisdiction,
as determined by the commissioner pursuant to par. (c) of this subsection. If a
certified reinsurer's domiciliary jurisdiction ceases to be a qualified
jurisdiction, the commissioner has the discretion to suspend the reinsurer's
certification indefinitely, in lieu of revocation.
2. The assuming insurer shall maintain
minimum capital and surplus, or its equivalent, of not less than $250,000,000.
This requirement may also be satisfied by a group including incorporated and
individual unincorporated underwriters having minimum capital and surplus
equivalents, net of liabilities, of at least $250,000,000 and a central fund
containing a balance of at least $250,000,000. For certified reinsurers not
domiciled in the U.S., minimum capital and surplus shall be determined on a
U.S. GAAP basis.
insurer shall apply for certification and maintain current financial strength
rating from two or more approved rating agencies. Approved rating agencies
include Fitch Investor Service, Inc., Standard & Poor's Corporation,
Moody's Investors Service, Inc., and A.M. Best Company. The commissioner shall
assign a rating to each certified reinsurer and publish a list of all certified
reinsurers and their ratings. The commissioner shall post notice on the
office's website promptly upon receipt of any application of certification
including instructions on how members of the public may comment on the
application. The commissioner shall issue a written notice to an assuming
insurer no sooner than 30 days after receipt of the application indicating
whether the assuming insurer has been approved for certification. If approved
as a certified reinsurer, the notice shall include the rating assigned by the
commissioner in accordance with this subdivision. Each certified reinsurer
shall be rated on a legal entity basis, with consideration given to the group
rating when the commissioner deems appropriate, except that a group 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 rating process
include the following:
reinsurer's financial strength rating from an approved rating agency. The
maximum rating that a certified reinsurer may be assigned will correspond to
its financial strength rating as outlined in the table that follows. The
commissioner 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 financial strength
ratings from approved rating agencies will result in the loss of eligibility
AA+, AA, AA-
Aa1, Aa2, Aa3
AA+, AA, AA-
BBB+, BBB, BBB-
Baa1, Baa2, Baa3
BBB+, BBB, BBB-
Any other lower rating
Any other lower rating
Any other lower rating
Any other lower rating
applicant's business practices in dealing with its ceding insurers, including
compliance with contractual terms and obligations. If reinsurance obligations
to U.S. cedents that are in dispute and that are more than 90 days past due
exceed 5% of its reinsurance obligations to U.S. cedents as of the end of its
prior financial reporting year, or the applicant's reinsurance obligations to
any of the top 10 U.S. cedents (based on the amount of outstanding reinsurance
obligations as of the end of its prior financial reporting year) that are in
dispute and are more than 90 days past due exceed 10% of its total reinsurance
obligations to that U.S. cedent, then the applicant shall provide notice to the
commissioner that reinsurance obligations in dispute and past due exceed the
amounts described and a detailed explanation regarding the reasons for the
amount of disputed or overdue claims, or both. The applicant shall also provide
a description of the applicant's business practices in dealing with U.S. ceding
insurers, and a statement that the applicant commits to comply with all
contractual requirements applicable to reinsurance contracts with U.S. ceding
insurers. Upon receipt of such notice and explanation, the commissioner may
request additional information concerning the applicant's claims practices with
regard to any or all U.S. ceding insurers.
c. For certified reinsurers domiciled in the
U.S., a review of the most recent National Association of Insurance
Commissioners Annual Statement Blank. For certified reinsurers not domiciled in
the U.S., a review annually of Form CR-F or Form CR-S that are required to be
filed under this subsection.
history of the certified reinsurer for prompt payment of claims under
reinsurance agreements, based on analysis of ceding insurers, Schedule F
reporting of overdue reinsurance recoverables including the proportion of
obligations that are more than 90 days past due or are in dispute, with
specific emphasis placed on obligations payable to companies that are in
administrative supervision or receivership.
e. Regulatory actions against the certified
f. The report of the
independent auditor on the financial statements of the insurance enterprise, on
the basis described in subd. 3. g.
g. For certified reinsurers not domiciled in
the U.S., audited financial statements on a U.S. GAAP basis, regulatory
filings, and actuarial opinions filed with the non-U.S. jurisdiction
supervisor. Audited IFRS basis statements are allowed in lieu of a U.S. GAAP
basis statement if they include an audited footnote reconciling equity and net
income to a U.S. GAAP basis, or, with the commissioner's approval, audited IFRS
basis statements with reconciliation to U.S. GAAP certified by an officer of
the company. Upon initial application for certification, the commissioner shall
consider audited financial statements for the previous three years filed with
its non-U.S. jurisdiction supervisor.
h. The liquidation priority of obligations to
a ceding insurer in the certified reinsurer's domiciliary jurisdiction in the
context of an insolvency proceeding.
i. A certified reinsurer's participation in
any solvent scheme of arrangement, or similar procedure, which involves U.S.
ceding insurers. The commissioner shall receive prior notice from a certified
reinsurer that proposes participation by the certified reinsurer in a solvent
scheme of arrangement.
j. Any other
information deemed relevant by the commissioner.
The assuming insurer shall agree to submit
to the jurisdiction of this state by submitting a properly executed Form CR-1,
appointing the commissioner as its agent for service of process in this state,
and agreeing to provide security of 100% of the assuming insurer's liabilities
attributable to reinsurance ceded by U.S. ceding insurers if its resists
enforcement of a final U.S. judgment. The commissioner shall not certify an
assuming insurer that is domiciled in a jurisdiction the commissioner has
determined does not adequately and promptly enforce final U.S. judgments or
Note: Form CR-1 is published in Chapter Ins 52
certified reinsurer must agree to meet applicable filing requirements. All
information submitted by certified reinsurers which is not otherwise public
information subject to disclosure shall be withheld from public disclosure
Stats. The filing requirements are as follows:
a. Notification within 10 days of any
regulatory actions taken against the certified reinsurer, any changes in the
provisions of its domiciliary license or any change in rating by an approved
rating agency, including a statement describing changes and the reasons
b. Annually, Form CR-F
or CR-S, as applicable.
Annually, the report of the independent auditor on the financial statements of
the insurance enterprise, on the basis described in subd. 3. f.
d. Annually, audited financial statements,
regulatory filings, and actuarial opinion as filed with the certified
reinsurer's supervisor. Upon the initial certification, audited financial
statements for the last three years filed with the certified reinsurer's
supervisor. Audited financial statements should be provided on a U.S. GAAP
basis if available. Audited IFRS basis statements are allowed but must include
an audited footnote reconciling equity and net income to a U.S. GAAP basis, or,
with permission of the commissioner, audited IFRS statements with
reconciliation to U.S. GAAP certified by an officer of the company.
e. At least annually, an updated list of all
disputed and overdue reinsurance claims which meet the thresholds described in
subd. 3. b. regarding reinsurance assumed from U.S. domestic ceding
f. Annually, a
certification for 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. An annual renewal application for
certification by October 1st to be considered for certification for the next
h. Any other
information deemed relevant by the commissioner.
The certified reinsurer shall secure its
obligations assumed from U.S. ceding insurers at a level consistent with the
rating set by the commissioner. The credit allowed shall be based upon the
security held by or on behalf of the ceding insurer in accordance with the
rating assigned to the reinsurer by the commissioner and shall be maintained in
a form that is consistent with s.
and this section, for multibeneficiary trusts.
The amount of security required in order for full credit to be allowed shall
correspond with the following requirements:
Secure - 5
Vulnerable - 6
commissioner shall require the certified reinsurer to post 100% security, for
the benefit of the ceding insurer or its estate, upon the entry of an order of
rehabilitation, liquidation, or conservation against the ceding
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 up to one 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 that is likely to
result in significant insured losses as recognized by the commissioner. The one
year deferral period is contingent upon the certified reinsurer continuing to
pay claims in a timely manner in compliance with its contractual obligations as
set forth in the reinsurance agreement under which the claims are ceded.
Reinsurance recoverables for only the following lines of business as reported
on the National Association of Insurance Commissioners annual financial
statement related specifically to the catastrophic occurrence will be included
in the deferral:
Line 1: Fire
Line 2: Allied Lines
Line 3: Farmowners multiple peril
Line 4: Homeowners multiple peril
Line 5: Commercial multiple peril
Line 9: Inland Marine
Line 12: Earthquake
Line 21: Auto physical damage
d. Based on an analysis of a certified
reinsurer's history of prompt payment of claims, the commissioner may make
appropriate adjustments in the security the certified reinsurer is required to
post to protect its liabilities to U.S. ceding insurers. The commissioner
shall, at a minimum, increase the security the certified reinsurer is required
to post by one rating level if the commissioner finds that more that 15% of the
certified reinsurers ceding insurance clients have overdue reinsurance
recoverables on paid losses of 90 days or more which are not in dispute and
which exceed $100,000 for each cedent or the aggregate amount of reinsurance
recoverables on paid losses which are not in dispute that are overdue by 90
days or more exceeds $50,000,000.
e. In the case of a downgrade by a rating
agency or other disqualifying circumstance, the commissioner shall assign by
written notice a new rating to the certified reinsurer pursuant to this
section. The certified reinsurer shall meet the security requirements
applicable to its new rating for all business assumed as a certified reinsurer
by the date specified by the commissioner in the written notice. If the rating
of a certified reinsurer is upgraded by the commissioner, the certified
reinsurer may meet the applicable security requirements of its new rating for
reinsurance agreements entered into after the date of the upgrade. For
reinsurance agreements entered into before the date of the upgrade, the
certified reinsurer shall post security as required by the certified
reinsurer's rating before the upgrade.
f. If a certified reinsurer maintains a trust
to fully secure its obligations under sub. (4) (c) and chose to secure its
obligations incurred as a certified reinsurer in the form of a multibeneficiary
trust, the certified reinsurer shall maintain separate trust accounts for its
obligations under sub. (4) (c) and for its obligations under this subsection.
As a condition for certification, the reinsurer shall have bound itself by the
language of the trust and agreement with the commissioner with principal
regulatory oversight of each such trust account, to fund, upon termination of
any such trust account, out of the remaining surplus of such trust any
deficiency of any other trust account.
g. The minimum trusteed surplus requirements
provided in sub. (4) (c) and (d) are not applicable with respect to a
multibeneficiary trust maintained by a certified reinsurer for the purpose of
securing obligations incurred under this subsection, except that such trust
shall maintain a minimum of trusteed surplus of $10,000,000.
h. If the security held by the certified
reinsurer under this subsection is insufficient, the commissioner shall reduce
the allowable credit by an amount proportionate to the deficiency and has the
discretion to impose further reductions in allowable credit if there is a
material risk that the certified reinsurer's obligations will not be paid in
i. A certified reinsurer
whose certification has been terminated for any reason shall be treated as a
certified reinsurer required to secure 100% of its obligations.
7. The assuming insurer must
satisfy any other requirements for certification deemed relevant by the
association including incorporated and individual unincorporated underwriters
may be a certified reinsurer. In order to be eligible for certification, in
addition to satisfying the requirements of par. (a):
1. The association shall satisfy its minimum
capital and surplus requirement through capital and surplus equivalents, net of
liabilities, of the association and its members, which shall include a joint
central fund that may be applied to any unsatisfied obligation of the
2. The incorporated
members of the association shall not be engaged in any business other than
underwriting as a member of the association and shall be subject to the same
level of regulation and solvency control by the association's domiciliary
regulator as are the unincorporated members.
3. Within 90 days after its financial
statements are due to be filed with the association's domiciliary regulator,
the association shall provide the commissioner an annual certification by the
association's domiciliary regulator of the solvency of each underwriter member
or, if certification is unavailable, financial statements prepared by
independent public accountants of each underwriter member of the
commissioner shall create and publish electronically a list of qualified
jurisdictions under which an assuming insurer licensed and domiciled therein is
eligible to be considered for certification by the commissioner. Qualified
jurisdictions shall be determined using the following criteria:
1. In order to determine whether the
domiciliary jurisdiction of a non-U.S. insurer is eligible to be recognized as
a qualified jurisdiction, the commissioner shall evaluate the appropriateness
and effectiveness of the reinsurance supervisory system of the jurisdiction,
both initially and on an ongoing basis, and consider the rights, benefits, and
the extent of reciprocal recognition afforded by the non-U.S. jurisdiction to
reinsurers licensed and domiciled in the United States. A qualified
jurisdiction shall agree to share information and cooperate with the
commissioner with respect to all certified reinsurers domiciled within that
jurisdiction. A jurisdiction may not be recognized as a qualified jurisdiction
if the commissioner has determined that the jurisdiction does not adequately
and promptly enforce final U.S. judgments and arbitration awards.
The commissioner shall consider the list
of qualified jurisdictions published through the National Association of
Insurance Commissioners in determining qualified jurisdictions. If the
commissioner approves a jurisdiction as qualified that does not appear on the
National Association of Insurance Commissioners list, the commissioner shall
provide a justification for determining the jurisdiction is qualified. Factors
to be considered in determining whether to recognize a qualified jurisdiction
a. The framework under which the
assuming insurer is regulated.
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 publically available by reinsurers in the
domiciliary jurisdiction and the accounting principles used.
e. The domiciliary regulator's willingness to
cooperate with U.S. regulators in general and the commissioner in
f. The history of
performance by assuming insurers in the domiciliary jurisdiction.
g. Any documented evidence of substantial
problems with enforcement of final U.S. judgments in the domiciliary
jurisdiction. A jurisdiction will not be considered to be a qualified
jurisdiction if the commissioner has determined that it does not adequately and
promptly enforce final U.S. judgments and 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.
i. Any other matters deemed relevant by the
jurisdictions that meet the requirements for accreditation under the National
Association of Insurance Commissioners financial standards and accreditation
program shall be recognized as qualified jurisdictions.
If an applicant has been certified as a
reinsurer in a National Association of Insurance Commissioners accredited
jurisdiction, the commissioner has the discretion to defer to that
jurisdiction's certification, and has the discretion to defer to the rating
assigned by that jurisdiction if the assuming insurer submits Form CR-1 and
such additional information as the commissioner requires. The commissioner's
recognition of another accredited jurisdiction's certification is subject to
the following conditions:
Note: Form CR-1 is published as Chapter Ins 52
1. 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 commissioner of any
change in its status or rating within 10 days of receiving notice of the
2. The commissioner may
withdraw recognition of the other jurisdiction's rating at any time and assign
a new rating in accordance with this section.
The commissioner may withdraw recognition
of the other jurisdiction's certification at any time, with written notice to
the reinsurer. Unless the commissioner suspends or revokes the certified
reinsurer's certification in accordance with s.
, the certified reinsurer's certification shall
remain in good standing in this state for a period of three months, which may
be extended if additional time is necessary to consider the assuming insurer's
application for certification in this state.