CHAPTER Ins 600
CREDIT FOR REINSURANCE
Statutory
Authority: RSA 400-A:15; RSA 405:52
REVISION NOTE:
Document
#6090, effective 9-7-95, made extensive changes to the wording, format,
structure, and numbering of rules in Chapter Ins 600. Document #6090 supersedes all prior filings
for the sections in this chapter. The
prior filings for former Chapter Ins 600 include the following documents:
#4555,
eff 12-29-88
#5649,
eff 7-1-93
CHAPTER
Ins 600 CREDIT FOR REINSURANCE
Statutory Authority: RSA 400-A:15 I; RSA 405:52-a
PART
Ins 601 CREDIT FOR REINSURANCE
Ins 601.01
Purpose. The
purpose of this rule is to set forth rules and procedural requirements that the
commissioner deems necessary to carry out the provisions of RSA 405:45; RSA 405:46;
RSA 405:47; RSA 405:48; RSA 405:49; RSA 405:50; RSA 405:51 and RSA 405:52. The actions and information required by this
rule are declared to be necessary and appropriate in the public interest and
for the protection of the ceding insurers in this state.
Source. (See Revision Note at chapter heading for Ins
600) #6090, eff 9-7-95, EXPIRED: 9-7-03
New. #8240, eff 1-3-05; ss by #8827, eff 3-1-07
Ins 601.02 Reinsurer Licensed in This State. Pursuant to RSA 405:47, I, the commissioner
shall allow credit for reinsurance ceded by a domestic insurer to assuming
insurers that were licensed in this state as of any date on which statutory
financial statement credit for reinsurance is claimed.
Source. (See Revision Note at chapter heading for Ins
600) #6090, eff 9-7-95, EXPIRED: 9-7-03
New. #8240, eff 1-3-05
Ins 601.03 Accredited Reinsurers.
(a)
Pursuant to RSA 405:47, II, the commissioner 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 any
date on which statutory financial statement credit for reinsurance is
claimed. An accredited reinsurer:
(1) Files
a properly executed Form AR-1 (attached as an exhibit to this rule) as evidence
of its submission to this state's jurisdiction and to this state's authority to
examine its books and records;
(2) Files
with the commissioner 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 state, or, in the case of a U.S. branch of an alien assuming
insurer, is entered through and licensed to transact insurance or reinsurance
in at least one state;
(3) Files
annually with 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; and
a.
Maintains a surplus as regards to policyholders in an amount not less
than $20,000,000 and whose accreditation has not been denied by the commissioner
within 90 days of its submission; or
b.
Maintains a surplus as regards to policyholders of less than
$20,000,000, and whose accreditation has been approved by the commissioner.
(b) If
the commissioner determines that the assuming insurer has failed to meet or
maintain any of these qualifications, the commissioner may upon written notice
and hearing revoke the accreditation.
Credit shall not be allowed a domestic ceding insurer if the assuming
insurer's accreditation has been revoked by the commissioner.
Source. (See Revision Note at chapter heading for Ins
600) #6090, eff 9-7-95, EXPIRED: 9-7-03
New. #8240, eff 1-3-05; ss by #8827, eff 3-1-07
Ins 601.04 Reinsurer Domiciled
in Another State.
(a) Pursuant to RSA 405:47, III, the commissioner
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) Is
domiciled in (or, in the case of a U.S. branch of an alien assuming insurer, is
entered through) a state that employs standards regarding credit for
reinsurance substantially similar to those applicable under RSA 405:45; RSA
405:46; RSA 405:47; RSA 405:48; RSA 405:49 and RSA 405:50, and this rule.
(2)
Maintains a surplus as regards policyholders in an amount not less than
$20,000,000; and
(3) Files
a properly executed Form AR-1 with the commissioner as evidence of its
submission to this state's authority to examine its books and records.
(b) The
provisions of this part 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 commissioner determines equal
or exceed the standards of RSA 405 and this rule.
Source. (See Revision Note at chapter heading for Ins
600) #6090, eff 9-7-95, EXPIRED: 9-7-03
New. #8240, eff 1-3-05; ss by #8827, eff 3-1-07
Ins 601.05 Reinsurers Maintaining Trust Funds.
(a)
Pursuant to RSA 405:46, IV, the commissioner 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, maintains a trust fund in an amount
prescribed below in a qualified U.S. financial institution as defined in RSA
405:46, VII, for the payment of the valid claims of its U.S. domiciled ceding insurers, their assigns
and successors in interest. The assuming
insurer shall report annually to the commissioner substantially the same
information as that required to be reported on the National Association of
Insurance Commissioners (NAIC) annual statement form by licensed insurers, to
enable the commissioner 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
(2) a.
The trust fund for a group including incorporated and individual
unincorporated underwriters shall consist of:
1. For reinsurance ceded under
reinsurance agreements with an inception, amendment or renewal date on or after
August 1, 1995, funds in trust in an amount not less than the group’s several
liabilities attributable to business ceded by U.S. domiciled ceding insurers to
any member of the group;
2. For reinsurance ceded under reinsurance
agreements with an inception date on or before July 31, 1995, 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 group’s several insurance and
reinsurance liabilities attributable to business written in the United States;
and
3. In additional to these trusts, the group
shall maintain a trusteed surplus of which $100,000,000 shall be held jointly
for the benefit of
b. 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 90 days after its financial statements are due
to be filed with the group’s domiciliary regulator, provide to the
commissioner:
1. An annual certification by the group’s
domiciliary regulator of the solvency of each underwriter member of the group;
or
2. If a certification is unavailable, a
financial statement, prepared by independent public accountants, of each
underwriter member of the group.
3. a. The trust fund for a group of incorporated
insurers under common administration, whose members possess aggregate
policyholders surplus of $10,000,000,000 (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 3 years immediately prior to making application for
accreditation, shall:
1.
Consist of funds in trust in an amount not less than the assuming
insurers' several liabilities
attributable to business ceded by U.S. domiciled ceding insurers to any members
of the group pursuant to reinsurance contracts issued in the name of such
group;
2. Maintain a joint trusteed surplus of which
$100,000,000 shall be held jointly for the benefit of U.S. domiciled ceding
insurers of any member of the group; and
3. File a properly executed Form AR-1 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 such
examination.
b. Within 90 days after the statements are due
to be filed with the
group's domiciliary regulator, the group
shall file with the commissioner 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) (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 commissioner of the state where the trust is domiciled or the
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 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 30 days after entry of the final order of any
court of competent jurisdiction in the
b. Legal
title to the assets of the trust shall be vested in the trustee for the benefit
of the grantor's
c. The
trust shall be subject to examination as determined by the commissioner;
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 trustee of the trust shall report to
the commissioner 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) 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 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.
b. 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.
c. If the commissioner 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 U.S. beneficiaries of the trust, the commissioner 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
(d)
For purposes of this rule, the term “liabilities” shall mean the
assuming insurer’s gross liabilities attributable to reinsurance ceded by
(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 by 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 RSA 405:47 and this section shall be valued according to their fair
market value and shall consist only of cash in U.S. dollars, certificates of
deposit issued by a U.S. financial institution as defined in RSA 405:46 VII.,
clean, irrevocable, unconditional and “evergreen” letters of credit issued or
confirmed by a qualified U.S. financial institution as defined in RSA 405:46
VII., and investments of the type specified in this subsection, but investments
in or issued by any entity controlling, controlled by or under common control
with either the grantor or beneficiary of the trust shall not exceed 5 percent
of total investments. No more than 20
percent of the total of the investments in the trust may be foreign investments
authorized under Ins 601.05 (e)(1) e., (3), (6) b., and (7) below of this subsection,
and no more than 10 percent 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 U.S. 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 RSA 405:47 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 Sates or by any agency or
instrumentality of the
b. A state of the
c. A territory, possession or other governmental
unit of the
d. An agency or instrumentality of a
governmental unit referred to in b. and c. above 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 this
paragraph 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-U.S. market, by a
solvent U.S. institution (other than an insurance company) or that are assumed
or guaranteed by a solvent U.S. 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
a 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 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-U.S. institution chartered in a country that is a member of the
Organization for Economic Cooperation and Development or obligations of U.S.
corporations issued in a non-U.S. 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 (1), (2) or (3) above 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 5 percent of the assets of the trust;
b. An investment in any one mortgage-related
security shall not exceed 5 percent of the assets of the trust;
c. The aggregate total investment in
mortgage-related securities shall not exceed 25 percent of the assets of the
trust; and
d. Preferred or guaranteed shares issued or
guaranteed by a solvent
(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:
1.
Represents ownership of one 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:
(i) 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
(ii) 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
2. Is secured by one 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 a.(i) and a.(ii) above;
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
1.
Its obligations and preferred shares, if any, are eligible as
investments under this subsection; and
2. 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 National Association of Securities Dealers,
Inc. A trust shall not invest in equity
interests under this paragraph an amount exceeding one percent 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 :
1. 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
2.
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 in or loan upon any one
institution’s outstanding equity interests shall not exceed one percent of the
assets of the trust. The cost of an
investment in equity interests made pursuant to this paragraph, when added to
the aggregate cost of other investments in equity interests then held pursuant
to this paragraph, shall not exceed 10 percent 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:
1.
Invests at least 90 percent of its assets in the types of securities
that qualify as an investment under (e) (1), (2) and (3) above or invests in
securities that are determined by the commissioner to be substantively similar
to the types of securities set forth in (e) (1), (2) and (3) above; or
2. Invests at least 90 percent of its assets in
the types of equity interests that qualify as an investment under (e)(6) a.
above;
b. Investments made by a trust in investment
companies under this paragraph shall not exceed the following limitations:
1. An investment in an investment company
qualifying under (8)a.1. above shall not exceed 10 percent of the assets in the
trust and the aggregate amount of investment in qualifying investment companies
shall not exceed 25 percent of the assets in the trust; and
2. Investments in an investment company
qualifying under (8)a.2. above shall not exceed 5 percent 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 (6) a. above.
(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 commissioner), 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.
(10) A
specific security provided to a ceding insurer by an assuming insurer pursuant
to Ins 601.07 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
this section.
Source. (See Revision Note at chapter heading for Ins
600) #6090, eff 9-7-95, EXPIRED: 9-7-03
New. #8240, eff 1-3-05; ss by #8827, eff 3-1-07
Ins 601.06 Credit for Reinsurance Required by Law. Pursuant to RSA 405:47, V, the commissioner
shall allow credit for reinsurance ceded by a domestic insurer to an assuming
insurer not meeting the requirements of RSA 405:47, I, II, III or IV, but only
as to the insurance of risks located in jurisdictions where such 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
Source. (See Revision Note at chapter heading for Ins
600) #6090, eff 9-7-95, EXPIRED: 9-7-03
New. #8240, eff 1-3-05; ss by #8827, eff 3-1-07
Ins 601.07 Asset or Reduction From Liability for
Reinsurance Ceded to an Unauthorized Assuming Insurer Not Meeting the
Requirements of Ins 601.02 through Ins 601.06.
(a) Pursuant to RSA 405:50, the commissioner
shall allow a reduction from liability for reinsurance ceded by a domestic
insurer to an assuming insurer not meeting the requirements of RSA 405:47 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
(1) Cash;
(2) Securities listed by the Securities Valuation
Office of the NAIC 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 RSA 405:46, VI, 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 company 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
commissioner.
(b) An admitted asset or a reduction from liability
for reinsurance ceded to an unauthorized assuming insurer pursuant to this
section shall be allowed only when the requirements of Ins 601.11 and the
applicable portions of Ins 601.08, Ins 601.09 and Ins 601.10 of this rule have
been satisfied.
Source. (See Revision Note at chapter heading for Ins
600) #6090, eff 9-7-95, EXPIRED: 9-7-03
New. #8240, eff 1-3-05; ss by #8827, eff 3-1-07
Ins 601.08
Trust Agreements Qualified Under Ins 601.07.
(a) As used in this section:
(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.
(3)
"Obligations," as used in (b)(11) of this section 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
(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
(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 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 Ins 601.08 (b)(11).
(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 such 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 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
the 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 30 days, but not more than 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 purposes 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 commissioner), 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 own
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 102 percent 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 10 days prior to the
termination date, to withdraw amounts equal to the obligations and deposit
those amounts in a separate account, in the name of the ceding insurer in any
qualified U.S. financial institution as defined in RSA 405:46, VII, apart from
its general assets, in trust for such uses and purposes specified in (11) a.
and b. above 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 Ins 601.07 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:
1.
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
2.
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 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 U.S. financial institution apart from its
general assets, in trust for the uses and purposes specified in subparagraphs
a. and b. of this paragraph as may remain executory after withdrawal and for
any period after the termination date.
(13) The
reinsurance agreement may, but need not, contain the provisions required in Ins
601.08 (c)(1)b. below, so long as these required conditions are included in the
trust 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 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 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 shall
be either 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 funds and to accept substitutions that the trustee determines
are at least equal in market value to the assets withdrawn and that are
consistent with the restrictions in Ins 601.08 (c)(1)b. below.
(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.
(c) 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.
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 statutes 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 5 percent of total investments. The reinsurance agreement may further specify
the types of investments to be deposited.
Where a trust agreement is entered into in conjunction with a
reinsurance agreement covering risks other than life, annuities and accident
and health, then the trust agreement may contain the provisions required by
this paragraph in lieu of including such provisions in the reinsurance
agreement;
c. 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;
d.
Require that all settlements of account between the ceding insurer and
the assuming insurer be made in cash or its equivalent; and
e.
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:
1.
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 because of
cancellations of such policies;
(ii)
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; and
(iii)
Any other amounts necessary to secure the credit or reduction from
liability for reinsurance taken by the ceding insurer;
2.
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 may also 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:
1.
The assuming insurer shall, at the time of withdrawal, replace the withdrawn
assets with other qualified assets having a 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
2.
After withdrawal and transfer, the market value of the trust account is
no less than 102 percent of the required amount.
b.
Provide for the return of any amount withdrawn in excess of the actual
amounts required for Ins 601.08 (c)(1)e. above, and for interest
payments at a rate not in excess of the prime rate of interest on the amounts
held pursuant to Ins 601.08 (c)(2)b. above.
c. Permit
the award by any arbitration panel or court of competent jurisdiction of:
1.
Interest at a rate different from that provided in Ins 601.08 (c)(2)b.
above;
2.
Court of arbitration costs;
3.
Attorney's fees; and
4.
Any other reasonable expenses.
(3)
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.
(4)
Existing Agreements.
Notwithstanding the effective date of this rule, any trust agreement or
underlying reinsurance agreement in existence prior to the effective date of
this rule shall continue to be acceptable until 6 months after the effective
date of this rule, at which time the agreements will have to fully comply with
this rule for the trust agreement to be acceptable.
(5) The failure of any trust agreement to
specifically identify the beneficiary as defined in (a) above shall not be
construed to affect any actions or rights that the commissioner may take or
possess pursuant to the provisions of the laws of this state.
Source. (See Revision Note at chapter heading for Ins
600) #6090, eff 9-7-95, EXPIRED: 9-7-03
New. #8240, eff 1-3-05; ss by #8827, eff 3-1-07
Ins 601.09 Letters of Credit Qualified Under Ins
601.07.
(a) The letter of credit must be clean,
irrevocable and unconditional and issued or confirmed by a qualified
(b) The
heading of the letter of credit may include a boxed section containing 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
(d) The
term of the letter of credit shall be for at least one 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 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 500) 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 or more of the occurrences specified in Article 17
of Publication 500 or any other successor publication, occur.
(g) The
letter of credit shall be issued or confirmed by a qualified
(h) If
the letter of credit is issued by a qualified
(1) The
issuing qualified United States 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 30 days notice prior to
expiration date for nonrenewal.
(i)
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 or more of the following reasons:
1.
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 insurers, to the
owners of policies reinsured under the reinsurance agreement on account of
cancellations of such policies;
(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
insurers, under the terms and provisions of the policies reinsured under the
reinsurance agreement; and
(iii)
Any other amounts necessary to secure the credit or reduction from
liability for reinsurance taken by the ceding insurer;
2.
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 specific reinsurance remain unliquidated
and undischarged 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
U.S. financial institution apart from its general assets, in trust for such
uses and purposes specified in Ins 601.09 (i)(1)b.1. as may remain after
withdrawal and for any period after the termination date.
c. All of the provisions of paragraph Ins 601.09
(i)(1) above shall be applied without diminution because of insolvency on the
part of the ceding insurer or assuming insurer.
(2)
Nothing contained in paragraph Ins 601.09 (i)(1) above 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 Ins 601.09 (i)(1)b. above; 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.
Source. (See Revision Note at chapter heading for Ins
600) #6090, eff 9-7-95, EXPIRED: 9-7-03
New. #8240, eff 1-3-05; ss by #8827, eff 3-1-07
Ins 601.10 Other
Security. A ceding insurer may take credit for
unencumbered funds withheld by the ceding insurer in the
Source. (See Revision Note at chapter heading for Ins
600) #6090, eff 9-7-95, EXPIRED: 9-7-03
New. #8240, eff 1-3-05; ss by #8827, eff 3-1-07
Ins 601.11 Reinsurance Contract.
(a) Credit shall 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 Ins 601.02; Ins 601.03; Ins 601.04; Ins 601.05; Ins
601.07 or otherwise in compliance with RSA 405:47 after the adoption of this rule
unless the reinsurance agreement:
(1) Includes a proper insolvency clause pursuant
to RSA 405:49; and
(2) Includes a provision pursuant to RSA 405:47,
VI 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 the 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 the court or panel.
Source. (See Revision Note at chapter heading for Ins
600) #6090, eff 9-7-95, EXPIRED: 9-7-03
New. #8240, eff 1-3-05; ss by #8827, eff 3-1-07
Ins 601.12 Contracts Affected. All new and renewal reinsurance transactions
entered into 6 months after the effective date of this rule shall conform to the requirements of the chapter
and this rule if credit is to be given to the ceding insurer for such
reinsurance.
Source. (See Revision Note at chapter heading for Ins
600) #6090, eff 9-7-95, EXPIRED: 9-7-03
New. #8240, eff 1-3-05; ss by #8827, eff 3-1-07
FORM AR-1
CERTIFICATE OF ASSUMING INSURER
I, __________________________________________________________________________________
(name
of officer) (title
of officer)
of ________________________________________________________________________,
the assuming
(name of assuming
insurer)
insurer under a reinsurance agreement with one
or more insurers domiciled in
_________________________________________________,
hereby certify that
(name of state)
___________________________________________________________("Assuming
Insurer"):
(name of assuming
insurer)
1.
Submits to the jurisdiction of any court of competent jurisdiction in
___________________________________________________________________________________
(ceding insurer's
state of domicile)
for the adjudication of any issues arising out
of the reinsurance agreement, agrees to comply with all requirements necessary
to give such court jurisdiction, and will abide by the final decision of such
court or any appellate court in the event of an appeal. Nothing in this paragraph constitutes or
should be understood to constitute a waiver of Assuming Insurer's rights to
commence an action in any court of competent jurisdiction in the United States,
to remove an action to a United States District
Court, or to seek a transfer of a case to another court as permitted by the
laws of the United States or of any state in the United States. This paragraph is not intended to conflict
with or override the obligation of the parties to the reinsurance agreement to
arbitrate their disputes if such an obligation is created in the agreement.
2.
Designates the Insurance Commissioner of
_______________________________________________
(ceding insurer's
state of domicile)
as its lawful attorney upon whom may be served
any lawful process in any action, suit or proceeding arising out of the
reinsurance agreement instituted by or on behalf of the ceding insurer.
3.
Submits to the authority of the Insurance Commissioner of
________________________________________________________
to examine its books and records and
(ceding insurer's
state of domicile)
agrees to bear the expense of any such
examination.
4.
Submits with this form a current list of insurers domiciled in
__________________________________________________________
reinsured by Assuming Insurer and
(ceding insurer's
state of domicile)
undertakes to submit additions to or deletions
from the list to the Insurance Commissioner at least once per calendar quarter.
Dated:_______________________
______________________________________
(name of
assuming insurer)
By: ______________________________________
(name of
officer)
______________________________________
(title of
officer)
Appendix
|
Ins
601.01 |
RSA
405:45; 405:46; 405:47; 405:48; 405:49; RSA 405:50; 405:51; 405:52 |
|
Ins
601.02 |
RSA
405:47 I |
|
Ins
601.03 |
RSA
405:47 II |
|
Ins
601.04 |
RSA
405:47 III |
|
Ins
601.05 |
RSA
405:47 IV; 405:46 VII |
|
Ins
601.06 |
RSA
405:47 V; 405:46 V |
|
Ins
601.07 |
RSA
405:48; 405:46 III; 405:47 VI |
|
Ins
601.08 |
RSA
405:47 VII |
|
Ins
601.09 |
RSA
405:46 II, V; 405:46 VI |
|
Ins
601.10 |
RSA
405:50 IV |
|
Ins
601.11 |
RSA
405:47; 405:49 |
|
Ins
601.12 |
RSA405:47;
405:49 |