Wis. Admin. Code Office of the Commissioner of Insurance § Ins 52.02 - Credit allowed a licensed ceding insurer
Except as provided by s.
Ins
52.04 and unless otherwise prohibited by the
commissioner with any such prohibition not to be in contravention of an
applicable
(1) The reinsurer is licensed as an insurer
in this state.
(2) The reinsurer is
accredited in this state by the commissioner at the time credit is claimed or
taken and the reinsurer:
(a) Files with the
commissioner evidence of its submission to this state's jurisdiction;
(b) Submits to this state's authority to
examine its books and records;
(c)
Files a properly executed Form AR-1 as evidence of its submission to this
state's jurisdiction and to this state's authority to examine its books and
records;
Note: Form AR-1 is published as Chapter Ins 52 Appendix A.
(d) Is licensed to transact insurance or
reinsurance in at least one 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 state;
(e) Files with the commissioner a certified
copy of a letter or a certificate of authority or of compliance as evidence
that it is licensed to transact insurance or reinsurance, or, in the case of a
United States branch of an alien assuming insurer, is entered through and
licensed to transact insurance or reinsurance, as required under par.
(d);
(f) Files annually with the
commissioner by March 1, or a later date approved in writing by the
commissioner, 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 annually by June 1; and
(g) Unless otherwise specifically approved in
writing by the commissioner, maintains policyholder surplus in an amount which
is not less than $20,000,000.
(h)
Demonstrates to the satisfaction of the commissioner that it has adequate
financial capacity to meet its reinsurance obligations and is otherwise
qualified to assume reinsurance from domestic insurers. An assuming insurer is
presumed to meet this requirement as of the time of its application if it
maintains a surplus as regards policyholders in an amount not less than
$20,000,000 and its accreditation has not been denied by the commissioner
within 90 days after submission of its application.
(3) The reinsurer is domiciled and licensed
in, or in the case of a United States branch of an alien assuming insurer is
entered through, a state which employs standards regarding credit for
reinsurance which the commissioner determines equal or exceed the standards
applicable under this subchapter and the reinsurer or United States branch of
an alien reinsurer:
(a) Submits to the
authority of this state to examine its books and records;
(b) Files a form AR-1 with the commissioner
to comply with par. (a); and
Note: Form AR-1 is published as Chapter Ins 52 Appendix A.
(c) Complies with one or more of the
following:
1. The reinsurer or United States
branch assumes the reinsurance under pooling arrangements among insurers in the
same holding company system; or
2.
The reinsurer maintains policyholder surplus in an amount not less than
$20,000,000.
(4) The reinsurer complies with all of the
following:
(a) The reinsurer maintains a trust
fund in a qualified fiduciary United States financial institution for the
payment of the valid claims of its United States policyholders and ceding
insurers, their assigns and successors in interest.
(b) The reinsurer reports annually, by March
1, or a later date which the commissioner approves in writing, to the
commissioner information substantially the same as that required to be reported
on the National Association of Insurance Commissioners Annual Statement form by
licensed insurers to enable the commissioner to determine the sufficiency of
the trust fund.
(c) The reinsurer
maintains in a trust account funds equal to an amount that is not less than the
assuming insurer's liabilities attributable to business written in the United
States and, in addition, the reinsurer maintains a trusteed surplus of not less
than $20,000,000.
(d) If the
reinsurers are a group including incorporated and individual unincorporated
underwriters, the reinsurers maintain in a trusteed account funds, for
reinsurance ceded under reinsurance agreements with an inception, amendment or
renewal date on or after January 1, 1993, in an amount not less than the
respective underwriters' several liabilities attributable to business ceded by
United States domiciled ceding insurers to any member of the group. For
reinsurance ceded under reinsurance agreements with an inception, amendment or
renewal date on or before December 31, 1992, the reinsurer shall maintain in a
trusteed account funds in amount not less than the respective underwriters'
several insurance and reinsurance liabilities attributable to business written
in the United States. In addition, the group maintains a trusteed surplus of
which $100,000,000 shall be held jointly for the benefit of United States
ceding insurers of any member of the group; the incorporated members of the
group are not engaged in any business other than underwriting as a member of
the group and are subject to the same level of solvency regulation and control
by the group's domiciliary regulator as are the unincorporated members; and the
group makes available to the commissioner or equivalent official of the ceding
licensed insurer's state of domicile or entry an annual certification of the
solvency of each underwriter by the group's domiciliary regulator and its
independent public accountants. For a domestic insurer, the certification shall
be filed with the commissioner by June 1 unless otherwise approved in writing
by the commissioner.
(e) The trust
is established in a form approved by the commissioner or equivalent official of
the ceding licensed insurer's state of domicile or entry. The trust instrument
shall provide, and the trustees comply with, all of the following:
1. Contested claims shall be valid and
enforceable out of funds in the trust if the claims remain unsatisfied 30 days
after the entry of a final order of any court of competent jurisdiction in the
United States.
2. Legal title to
the assets of the trust is vested in the trustee of the trust for the benefit
of the grantor's United States policyholders and ceding insurers, their assigns
and successors in interest.
3. The
trust and the assuming insurer are subject to examination as determined by the
commissioner.
4. The trust shall
remain in effect for as long as the assuming insurer, or any member or former
member of a group of insurers, has outstanding obligations due under the
reinsurance agreements subject to the trust.
5. No later than February 28 of each year,
unless a later date is approved in writing by the commissioner or equivalent
official of the ceding licensed insurer's state of domicile or entry, the
trustees of the trust shall report to the commissioner or equivalent official
of the ceding licensed insurer's state of domicile or entry 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 next
following December 31.
6. No
amendment to the trust may be effective unless reviewed and approved in writing
and in advance by the commissioner or equivalent official of the ceding
licensed insurer's state of domicile or entry.
7. Notwithstanding any other provision of the
trust instrument, if the trust fund is inadequate because it contains an amount
less than the amount required by this subsection 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 commissioner with
regulatory oversight over the trust or with an order of a court of competent
jurisdiction directing the trustee to transfer to the commissioner with
regulatory oversight over the trust or other designated receiver all of the
assets of the trust fund. The assets shall be distributed by and claims shall
be filed with and valued by the commissioner 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. If the
commissioner with regulatory oversight over the trust determines the assets of
the trust fund or any part thereof are not necessary to satisfy the claims of
the U.S. beneficiaries of the trust, the commissioner with regulatory oversight
over the trust shall return the assets to the trustee for distribution in
accordance with the trust agreement. The grantor shall waive any right
otherwise available to it under federal law that is inconsistent with this
provision.
8. If the commissioner
has principal regulatory oversight of the trust, at any time after the assuming
insurer has permanently discontinued writing new business for at least three
years, the commissioner may authorize a reduction in the required trusteed
surplus, but only after finding, based on an assessment of the risk, that the
new required surplus level is adequate for the protection of U.S. ceding
insurers, policyholders and claimants. 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 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 30% of the assuming insurer's liabilities attributable to reinsurance
ceded by U.S. ceding insurers.
(4m) 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
subsection.
(a) 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.
3. The assuming
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:
a. The certified
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
for certification.
|
Ratings |
A.M. 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 |
Any other lower rating |
Any other lower rating |
Any other lower rating |
Any other lower rating |
b.
The 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.
Note: Forms CR-F and CR-S are published as Chapter Ins 52 Appendices D to H.
d. The 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
reinsurer.
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, regulatory filings, and actuarial
opinion, as filed with the non-U.S. jurisdiction supervisor with a translation
into English. Upon initial application for certification, the commissioner
shall consider audited financial statements for the last 2 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.
4. 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
arbitration awards.
Note: Form CR-1 is published in Chapter Ins 52 Appendix B.
5. The 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 under s.
601.465,
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
therefore.
b. Annually, Form CR-F
or CR-S, as applicable.
Note: Forms CR-F and CR-S are published as Chapter Ins 52 Appendices D to H.
c. 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, the most recent audited financial statements, regulatory filings, and
actuarial opinion, as filed with the certified reinsurer's supervisor with a
translation into English. Upon the initial certification, audited financial
statements for the last 2 years filed with the certified reinsurer's
supervisor.
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 insurers.
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
calendar year.
h. Any other
information deemed relevant by the commissioner.
6. 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.
Ins
52.05 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:
|
a. Ratings |
Security Required |
|
Secure -1 |
0% |
|
Secure -2 |
10% |
|
Secure -3 |
20% |
|
Secure -4 |
50% |
|
Secure - 5 |
75% |
|
Vulnerable - 6 |
100% |
b. The
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
insurer.
c. 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
full.
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
commissioner.
(b) An
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
association.
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
association.
(c) 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.
2. 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
include:
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 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
particular.
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
commissioner.
3. U.S.
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.
(d) 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 Appendix B.
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 change.
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.
3.
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.
Ins
52.025, 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.
(e) A certified reinsurer that ceases to
assume new business from ceding insurers domiciled in this state may request to
maintain its certification in inactive status in order to continue to qualify
for a reduction in security for its in-force business. An inactive certified
reinsurer shall continue to comply with all applicable requirements of this
subchapter, and the commissioner shall assign a rating that takes into account
the reasons why the reinsurer is not assuming new business.
(f) In addition to the clauses required under
this chapter, reinsurance contracts entered or renewed under this subsection
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 this
section for reinsurance ceded to the certified reinsurer.
(g) The commissioner shall comply with all
reporting and notification requirements that may be established by the National
Association of Insurance Commissioners with respect to certified reinsurers and
qualified jurisdictions.
(h) Credit
for reinsurance under this subsection shall apply only to reinsurance contracts
entered into or renewed on or after the effective date of the certification of
the assuming insurer.
(i) Nothing
in this subsection 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 in this
subsection.
(j) The commissioner
may retain at the certified reinsurer's expense such experts as shall be
necessary to assist in the review of an initial application for certification
and on an ongoing basis. Any experts so retained shall be under the direction
and control of the commissioner. The commissioner may retain such experts as
may be necessary to evaluate the supervisory systems of jurisdictions under
evaluation for eligibility to become a qualified jurisdiction and on an ongoing
basis. The expense for such experts shall be paid by the reinsurers seeking
certification from that jurisdiction.
(4r) The reinsurance is ceded to an assuming
insurer that has been recognized by the commissioner as a reinsurer in a
reciprocal jurisdiction , in accordance with pars. (a) to (h).
(a) 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 shall be licensed to
transact reinsurance by, and have its head office or be domiciled in, a
reciprocal jurisdiction .
2. The
assuming insurer shall 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 subd. 7.,
according to the methodology of its domiciliary jurisdiction, in the following
amounts:
a. No less than $250,000,000;
or
b. If the assuming insurer is an
association, including incorporated and individual unincorporated underwriters,
the minimum capital and surplus equivalents, net of liabilities, or own funds
of the equivalent of at least $250,000,000, and, a central fund containing a
balance of the equivalent of at least $250,000,000.
3. The assuming insurer shall have and
maintain on an ongoing basis, a minimum solvency or capital ratio, as
applicable, as set forth in subd. 3. a. to c.If the assuming insurer is an
association, including incorporated and individual unincorporated underwriters,
it must meet the applicable requirement in the reciprocal jurisdiction where
the assuming insurer has its head office or is domiciled, as applicable, and is
also licensed:
a. If the assuming insurer has
its head office or is domiciled in a reciprocal jurisdiction as defined in s.
Ins 52.01(4)
(a), the ratio specified in the applicable
covered agreement ;
b. If the
assuming insurer is domiciled in a reciprocal jurisdiction as defined in s.
Ins 52.01(4)
(b), a risk-based capital ratio of 300% of
the authorized control level, calculated in accordance with the formula
developed by the national association of insurance commissioners; or
c. If the assuming insurer is domiciled in a
reciprocal jurisdiction as defined in s.
Ins 52.01(4)
(c), after consultation with the reciprocal
jurisdiction and considering any recommendations published through the national
association of insurance commissioners committee process, such solvency or
capital ratio as the commissioner determines to be an effective measure of
solvency.
4. The assuming
insurer shall agree to submit and provide adequate assurance, in the form of a
properly executed Form RJ-1, of its agreement to the following:
Note: Form RJ-1 is published as Chapter Ins 52 Appendix C.
a. The assuming insurer must agree to provide
prompt written notice and explanation to the commissioner if it falls below the
minimum requirements set forth in subd. 2. or 3., or if any regulatory action
is taken against it for serious noncompliance with applicable law.
b. The assuming insurer must consent in
writing to the jurisdiction of the courts of this state and to the appointment
of the commissioner as agent for service of process. The commissioner may also
require that such consent be provided and included in each reinsurance
agreement under the commissioner's jurisdiction. 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 or its legal successor,
that have been declared enforceable in the jurisdiction where the judgment was
obtained.
d. Each reinsurance
agreement shall include a provision requiring the assuming insurer to provide
security in an amount equal to 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 commissioner and to provide 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 s. Ins 52.02(4m) or 52.04.
f. The assuming insurer must agree in writing
to meet the applicable information filing requirements as set forth in subd. 5.
5. The assuming insurer
or its legal successor must provide, if requested by the commissioner, on
behalf of itself and any legal predecessors, the following documentation to the
commissioner:
a. For the two 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 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 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 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 subd. 6.
6. The assuming insurer must maintain a
practice of prompt payment of claims under reinsurance agreements. The lack of
prompt payment will be evidenced if any of the following criteria is met:
a. More than 15% of the reinsurance
recoverables from the assuming insurer are overdue and in dispute as reported
to the commissioner;
b. More than
15% of the assuming insurer's ceding insurers or reinsurers have overdue
reinsurance recoverable on paid losses of 90 days or more which are not in
dispute and which exceed for each ceding insurer $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 90 days
or more, exceeds $50,000,000, or as otherwise specified in a covered agreement .
7. The assuming insurer's
supervisory authority must confirm to the commissioner on an annual basis, as
of the preceding December 31 or at the annual date otherwise statutorily
reported to the reciprocal jurisdiction , that the assuming insurer complies
with the requirements set forth in subds. 2. and 3.
8. Nothing in this provision precludes an
assuming insurer from providing the commissioner with information on a
voluntary basis.
(b)
1g. The commissioner shall timely create and
publish electronically a list of reciprocal jurisdictions.
1r. A list of reciprocal jurisdictions is
published through the national association of insurance commissioners committee
process. The commissioner's list shall include any reciprocal jurisdiction as
defined in s.
Ins 52.01(4) (a) and
(b) and shall consider any other reciprocal
jurisdiction included on the national association of insurance commissioners
list. The commissioner may approve a jurisdiction that does not appear on the
national association of insurance commissioners list of reciprocal
jurisdictions as provided by applicable law, regulation or in accordance with
criteria published through the national association of insurance commissioners
committee process.
2. The
commissioner may remove a jurisdiction from the list of reciprocal
jurisdictions upon a determination that the jurisdiction no longer meets one or
more of the requirements of a reciprocal jurisdiction , as provided by
applicable law, regulation, or in accordance with a process published through
the national association of insurance commissioners committee process, except
that the commissioner shall not remove from the list a reciprocal jurisdiction
as defined in s.
Ins 52.01(4) (a) or
(b). Upon removal of a reciprocal
jurisdiction from this list, credit for reinsurance ceded to an assuming
insurer which has its home office or is domiciled in that jurisdiction shall be
allowed, if otherwise allowed pursuant to this subchapter.
(c)
1g. The
commissioner shall timely create and publish electronically a list of assuming
insurers that have satisfied the conditions set forth in this subsection and to
which cessions shall be granted credit in accordance with this
subsection.
1r. If a national
association of insurance commissioners accredited jurisdiction has determined
that the conditions set forth in par. (a) have been met, the commissioner has
the discretion to defer to that jurisdiction's determination and add such
assuming insurer to the list of assuming insurers to which cessions shall be
granted credit in accordance with this subsection. The commissioner may accept
financial documentation filed with another national association of insurance
commissioners accredited jurisdiction or with the national association of
insurance commissioners in satisfaction of the requirements of par. (a).
2. When requesting that the
commissioner defer to another national association of insurance commissioners
accredited jurisdiction's determination, an assuming insurer must submit a
properly executed Form RJ-1 and additional information as the commissioner may
require. Notwithstanding the foregoing, the commissioner will not impose any
requirement that conflicts with an applicable covered agreement . A state that
has received such a request will notify other states through the national
association of insurance commissioners committee process and provide relevant
information with respect to the determination of eligibility.
Note: Form RJ-1 is published as Chapter Ins 52 Appendix C.
(d)
1g. If
the commissioner determines that an assuming insurer no longer meets one or
more of the requirements under this subsection, the commissioner may revoke or
suspend the eligibility of the assuming insurer for recognition under this
subsection.
1r. 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 s.
Ins
52.04.
2.
If an assuming insurer's eligibility is revoked, no credit for reinsurance may
be granted after the effective date of the revocation with respect to any
reinsurance agreements entered into by the assuming insurer, including
reinsurance agreements entered into prior to the date of revocation, except to
the extent that the assuming insurer's obligations under the contract are
secured in a form acceptable to the commissioner and consistent with the
provisions of s.
Ins
52.04.
(e) Before denying statement credit or
imposing a requirement to post security with respect to par. (d) or adopting
any similar requirement that will have substantially the same regulatory impact
as security, the commissioner shall:
1.
Communicate with the ceding insurer, the assuming insurer, and the assuming
insurer's supervisory authority that the assuming insurer no longer satisfies
one of the conditions listed in par. (a);
2. Provide the assuming insurer with 30 days
from the initial communication to submit a plan to remedy the defect, and 90
days from the initial communication to remedy the defect, except in exceptional
circumstances in which the commissioner determines that a shorter period is
necessary for policyholder and other consumer protection;
3. After the expiration of 90 days or less,
as set out in subd. 2, if the commissioner determines that no or insufficient
action was taken by the assuming insurer, the commissioner may impose any of
the requirements as set out in this subsection; and
4. Provide a written explanation to the
assuming insurer of any of the requirements set out in this
subsection.
(f) 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.
(g)
Nothing in this subsection shall limit or in any way alter the capacity of
parties to a reinsurance agreement to agree on requirements for security or
other terms in that reinsurance agreement, except as expressly prohibited by
this subchapter or other applicable law or regulation.
(h)
1g.
Credit may be taken under this subsection only for reinsurance agreements
entered into, amended, or renewed on or after June 1, 2022, and only with
respect to losses incurred and reserves reported on or after the later of (i)
the date on which the assuming insurer has met all eligibility requirements
pursuant to this subsection, and (ii) the effective date of the new reinsurance
agreement, amendment, or renewal.
1r. This paragraph does not alter or impair a
ceding insurer's right to take credit for reinsurance, to the extent that
credit is not available under this subsection, as long as the reinsurance
qualifies for credit under any other applicable provision of this
subchapter.
2. Nothing in this
subsection shall authorize an assuming insurer to withdraw or reduce the
security provided under any reinsurance agreement except as permitted by the
terms of the agreement.
3. Nothing
in this subsection shall limit, or in any way alter, the capacity of parties to
any reinsurance agreement to renegotiate the agreement.
(5) The reinsurance
ceded to the reinsurer is with respect to the insurance of risks located in
jurisdictions where the reinsurance by the reinsurer is required by applicable
law or regulation of that jurisdiction. For the purpose of this subsection
"jurisdiction" means a state, district or territory of the United States or any
lawful national government.
Notes
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