(1) In this section "beneficiary" means the
insurer for whose benefit the letter of credit has been established and any
successor of the beneficiary by operation of law, including, but not limited
to, a court-appointed domiciliary receiver, including, but not limited to, a
conservator, rehabilitator or liquidator.
A ceding insurer may take credit under s.
only if the letter of credit
complies with all of the following:
letter of credit is clean, irrevocable and unconditional.
(b) The letter of credit contains an issue
date and date of expiration and stipulates 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.
(c) The letter of credit states that it is
not subject to any condition or qualifications outside of the letter of
(d) The letter of credit
itself shall not contain reference to any other agreements, documents or
entities, except as provided in sub. (3) (a) and (b).
(e) If the heading of the letter of credit
includes a section which includes notations to provide a reference for the
letter of credit, the section shall be boxed section and clearly marked to
indicate that the information is for internal identification purposes
(f) The letter of credit
states that the obligation of the qualified United States financial institution
under the letter of credit is in no way contingent upon
(g) The term of the
letter of credit is for at least one year and the letter of credit contains a
clause which prevents the expiration of the letter of credit unless the issuer
gives written notice to the ceding insurer. The "evergreen clause" shall
provide for a period of no less than 30 days' notice to the ceding insurer
prior to the expiration date for nonrenewal.
(h) The letter of credit states 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) and that all drafts drawn under the letter of credit are
presentable at an office in the United States of a qualified United States
(i) If the
letter of credit is made subject to the uniform customs and practice for
documentary credits of the international chamber of commerce (Publication 600),
the letter of credit specifically addresses and makes provision for an
extension of time to draw against the letter of credit if any of the
occurrences specified in Article 36 of Publication 600 occur.
(j) The letter of credit is issued or
confirmed by a qualified United States financial institution authorized to
issue letters of credit.
letter of credit is issued by a financial institution which is not a qualified
United States financial institution:
issuing financial institution formally designates the confirming qualified
United States financial institution as its agent for the receipt and payment of
the drafts; and
2. The letter of
credit "evergreen clause" under par. (g) requires the confirming qualified
United States financial institution to give written notice to the ceding
insurer at least 30 days prior to expiration date for nonrenewal.
A ceding insurer
may take credit under s.
only if there is a written
reinsurance agreement in conjunction with the letter of credit and the
(a) Requires the
assuming insurer to provide letters of credit to the ceding insurer, specifies
what the letters of credit are to cover, and provides that the provisions
required under this paragraph and par. (b) apply without diminution because of
insolvency by either the ceding or assuming insurer.
Except as permitted under par. (d),
stipulates that the assuming insurer and ceding insurer agree that the letter
of credit provided by the assuming insurer under the reinsurance agreement may
be drawn upon at any time, notwithstanding any other provisions in the
agreement, and may be utilized by the ceding insurer or its successors in
interest including, but not limited to, by any liquidator, rehabilitator,
receiver or conservator of the ceding insurer, without diminution because of
insolvency on the part of the ceding insurer or the assuming insurer, only for
one or more of the following reasons:
reimburse the ceding insurer for the assuming insurer's share of premiums
returned to the owners of policies reinsured under the reinsurance agreement
because of cancellations of the policies;
2. To reimburse the ceding insurer for the
assuming insurer's share of surrenders and benefits or losses paid by the
ceding insurer under provisions of the policies reinsured under the reinsurance
3. To fund an account
with the ceding insurer in an amount at least equal to the deduction, for
reinsurance ceded, from the ceding insurer liabilities for policies ceded under
the agreement. The account shall include, but not be limited to, amounts for
policy reserves, claims and losses incurred (including losses incurred but not
reported), loss adjustment expenses and unearned premium reserves;
4. To pay any other amounts the
ceding insurer claims are due under the reinsurance agreement.
Does not require the return of
amounts drawn under the letter of credit except the reinsurance agreement may
require the ceding insurer to return:
amount withdrawn in excess of the actual amounts required for par. (b) 1., 2.,
or 3., or in the case of par. (b) 4., any amounts that are subsequently
determined not to be due; and
Interest payments, at a rate not in excess of the prime rate of interest, on
the amounts held under par. (b) 3.
(d) Requires a trust agreement to accomplish
to the purpose of par. (b), instead of including that provision in the
reinsurance agreement, and the trust agreement is incorporated in the
reinsurance agreement or separately executed except a trust agreement may be
used only if the reinsurance agreement covers risks other than life, annuities
and health and if it is customary practice to provide a letter of credit for a