prop · H703111 · 2020-03-17 00:00:00 — (h)‘’ means the Party in which the insurance or reinsurance group or undertaking has operations, but is not the territory in which the worldwide parent undertaking of the insurance or reinsurance group or undertaking has its head office or is domiciled; (i)‘supervisory authority’ means a supervisory authority from the ; (j)‘Insurer’ means an undertaking which is authorised or licensed to take up or engage in the business of direct or primary insurance; (k)‘Parent’ means a regulated or unregulated undertaking that directly or indirectly owns or controls another undertaking; (l)‘’ means any information relating to an identified or identifiable natural person; (m)‘Reinsurer’ means an undertaking which is authorised or licensed to take up or engage in the business of reinsurance activities; L 258/6 (n)‘Reinsurance activities’ means the activity consisting of accepting risks ceded by an insurer or by another reinsurer; (o)‘Reinsurance agreement’ means a contract whereby an assuming reinsurer has accepted risk ceded by an insurer or reinsurer; (p)‘Supervisory authority’ means any insurance and reinsurance supervisor in Union or in the ; (q)‘Undertaking’ means any entity engaged in economic activity; (r)‘U.S. State’ means any State, commonwealth, territory, or possession of the , the , the Commonwealth of , the Commonwealth of the Northern , American , , or the ; (s)‘Worldwide’ means all operations or activities of a group wherever they occur; and (t)‘Worldwide parent undertaking’ means the ultimate parent undertaking of a group. 1.Subject to the conditions in paragraph 4, a Party shall not, and shall ensure that its supervisory authorities or any other competent authorities do not, as a condition to allow an assuming reinsurer which has its head office or is domiciled in the territory of the other Party (hereunder for the purpose of Article 3, a ‘Home Party Assuming Reinsurer’) to enter into a reinsurance agreement with a ceding insurer which has its head office or is domiciled in its territory (hereunder for the purpose of Article 3, a ‘Insurer’): (a)maintain or adopt any requirement to post collateral in connection with cessions from a Insurer to a Home Party Assuming Reinsurer and any related reporting requirement attributable to such removed collateral, or (b)maintain or adopt any new requirement with substantially the same regulatory impact on the Home Party Assuming Reinsurer as collateral requirements removed under this Agreement or any reporting requirement attributable to such removed collateral, which, in the case of either (a) or (b), results in less favourable treatment of Home Party Assuming Reinsurers than assuming reinsurers which have their head office or are domiciled in the territory of the same supervisory authority as a Insurer. This paragraph does not prohibit a Party in whose territory a ceding insurer has its head office or is domiciled (hereunder for the purpose of Article 3, a ‘’) or its supervisory authorities from applying requirements as a condition to allow the Home Party Assuming Reinsurers to enter into a reinsurance agreement with a Insurer if the same requirements apply to reinsurance agreements between a ceding insurer and an assuming reinsurer which have their head office or are domiciled in the territory of the same supervisory authority. 2.Subject to the conditions in paragraph 4, a not, and shall ensure that its supervisory authorities or any other competent authorities do not, as a condition to allow a Insurer to take credit for reinsurance or for risk mitigation effects of reinsurance agreements concluded with a Home Party Assuming Reinsurer: (a)maintain or adopt any requirement to post collateral in connection with cessions from a Insurer to a Home Party Assuming Reinsurer and any related reporting requirement attributable to such removed collateral, or (b)maintain or adopt any new requirement with substantially the same regulatory impact on the Home Party Assuming Reinsurer as collateral requirements removed under this Agreement or any reporting requirement attributable to such removed collateral, which, in the case of either (a) or (b), results in less favourable treatment of Home Party Assuming Reinsurers than assuming reinsurers which have their head office or are domiciled in the territory of the same supervisory authority as a Insurer. This paragraph does not prohibit a or its supervisory authorities from applying L 258/7 requirements as a condition to allow a Insurer to take credit for reinsurance or risk mitigation effects of reinsurance agreements concluded with a Home Party Assuming Reinsurer if the same requirements apply to reinsurance agreements between a ceding insurer and an assuming reinsurer which have their head office or are domiciled in the territory of the same supervisory authority. 3.Subject to the conditions in paragraph 4, a not, and shall ensure that its supervisory authorities or any other competent authorities, as applicable, do not, as a condition of entering into a reinsurance agreement with a Insurer or as a condition to allow the Insurer to recognise credit for such reinsurance or credit for risk mitigation effect of such reinsurance agreement: (a)maintain or adopt any requirement for a Home Party Assuming Reinsurer to have a local presence, or (b)maintain or adopt any new requirement with substantially the same regulatory impact on the Home Party Assuming Reinsurer as local presence, which, in the case of either (a) or (b), results in less favourable treatment of a Home Party Assuming Reinsurer than assuming reinsurers which have their head office or are domiciled in the territory of the supervisory authority of the Insurer or which have their head office or are domiciled in the territory of the and are licensed or permitted to operate in the territory of the supervisory authority of the Insurer. For a U.S. State, ‘permitted to operate’ shall mean, for purposes of this provision, admitted in that State. 4.Paragraphs 1 to 3 apply subject to the following conditions: (a)the assuming reinsurer has and maintains on an ongoing basis, (i)at least , where the ceding insurer has its head office in the EU, or 250 million U.S. dollars, where the ceding insurer is domiciled in the , of own funds or capital and surplus, calculated according to the methodology of its home jurisdiction; or (ii)if the assuming reinsurer is an association including incorporated and individual unincorporated underwriters: (A)minimum capital and surplus equivalents (net of liabilities) or own funds, calculated according to the methodology applicable in its home jurisdiction, of at least , where the ceding insurer has its head office in the EU, or 250 million U.S. dollars, where the ceding insurer is domiciled in the ; and (B)a central fund containing a balance of at least , where the ceding insurer has its head office in the EU, or 250 million U.S. dollars, where the ceding insurer is domiciled in the ; (b)the assuming reinsurer has and maintains on an ongoing basis: (i)a solvency ratio of 100 percent SCR under Solvency II or an RBC of 300 percent Authorized Control Level, as applicable in the territory in which the assuming reinsurer has its head office or is domiciled; or (ii)if the assuming reinsurer is an association including incorporated and individual unincorporated underwriters, a solvency ratio of 100 percent SCR under Solvency II or an RBC of 300 percent Authorized Control Level, as applicable in the territory in which the assuming reinsurer has its head office or is domiciled; (c)the assuming reinsurer agrees to provide prompt written notice and explanation to the supervisory authority in the territory of the ceding insurer if: (i)it falls below the minimum capital and surplus or own funds, as applicable, specified in subparagraph (a), or the solvency or capital ratio, as applicable, specified in subparagraph (b); or (ii)any regulatory action is taken against it for serious noncompliance with applicable law; L 258/8 (d)the assuming reinsurer provides written confirmation to the supervisory authority of consent to the jurisdiction of the courts of the territory in which the ceding insurer has its head office or is domiciled, in accordance with applicable requirements of that territory for providing such consent. Nothing in this Agreement shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms; (e)where applicable for ‘service of process’ purposes, the assuming reinsurer provides written confirmation to the supervisory authority of consent to the appointment of that supervisory authority as agent for service of process. The supervisory authority may require that such consent be provided to it and included in each reinsurance agreement under its jurisdiction; (f)the assuming reinsurer consents in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer, that have been declared enforceable in the territory where the judgment was obtained; (g)the assuming reinsurer agrees in each reinsurance agreement subject to this Agreement that it will provide collateral for 100 percent of the assuming reinsurer's liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming reinsurer resists enforcement of a final judgment that is enforceable under the law of the territory in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its resolution estate, if applicable; (h)The assuming reinsurer or its legal predecessor or successor, where applicable, provides the following documentation to the supervisory authority, if requested by that supervisory authority: (i)with respect to the two years preceding entry into the reinsurance agreement and on an annual basis thereafter, its annual audited financial statements, in accordance with the applicable law of the territory of its head office, including the external audit report; (ii)with respect to the two years preceding entry into the reinsurance agreement, solvency and financial condition report or actuarial opinion, if filed with the assuming reinsurer's supervisor; (iii)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 of the jurisdiction of the ceding insurer; and (iv)prior to entry into the reinsurance agreement and not more than semi-annually thereafter, information regarding the assuming reinsurer's assumed reinsurance by ceding company, ceded reinsurance by the assuming reinsurer, and reinsurance recoverable on paid and unpaid losses by the assuming reinsurer, to allow for the evaluation of the criteria set forth in subparagraph (i) of paragraph 4; (i)the assuming reinsurer maintains 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: (i)more than 15 percent of the reinsurance recoverables are overdue and in dispute as reported to the supervisor; (ii)more than 15 percent of the reinsurer's ceding insurers or reinsurers have overdue reinsurance recoverables on paid losses of 90 days or more which are not in dispute and which exceed for each ceding insurer , where the assuming reinsurer has its head office in the EU, or 100,000 U.S. dollars, where the assuming reinsurer is domiciled in the ; or (iii)the aggregate amount of reinsurance recoverables on paid losses which are not in dispute, but are overdue by 90 days or more, exceeds 45,200,, where the assuming reinsurer has its head office in the EU, or 50,000,000 U.S. dollars, where the assuming reinsurer is domiciled in the ; (j)the assuming reinsurer confirms that it is not presently participating in any solvent scheme of arrangement, which involves Insurers, and agrees to notify the ceding insurer and its supervisory authority and to provide 100 percent collateral to the ceding insurer consistent with the terms of the scheme should the assuming reinsurer enter into such an arrangement; L 258/9 (k)if subject to a legal process of resolution, receivership, or winding-up proceedings as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the resolution, receivership, or winding-up proceedings is pending, may obtain an order requiring that the assuming reinsurer post collateral for all outstanding ceded liabilities; and (l)the assuming reinsurer's Home supervisory authority confirms to the supervisory authority on an annual basis that the assuming reinsurer complies with subparagraph (b). 5.Nothing in this Agreement precludes an assuming reinsurer from providing to supervisory authorities information on a voluntary basis. 6.Each Party shall ensure that, in its capacity as a , with respect to its supervisory authorities, where the supervisory authority determines that a Home Party Assuming Reinsurer no longer satisfies one of the conditions listed in paragraph 4, the supervisory authority only imposes any of the requirements addressed in paragraphs 1 to 3 if that supervisory authority follows the procedure set out in subparagraphs (a) to (c): (a)prior to imposing any such requirements the supervisory authority communicates with the assuming reinsurer and, except for exceptional circumstances in which a shorter period is necessary for policyholder and other consumer protection, provides the assuming reinsurer 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, and informs the Home supervisory authority; (b)only where, after the expiry of this period of 90 days or less under exceptional circumstances as set out in (a), the supervisory authority considers that no or insufficient action was taken by the assuming reinsurer, the supervisory authority may impose any of the requirements as set out in paragraphs 1 to 3; and (c)the imposition of any of the requirements set out in paragraphs 1 to 3 is explained in writing and communicated to the assuming reinsurer concerned. 7.Subject to applicable law and the terms of this Agreement, nothing in this Article shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for collateral or other terms in that reinsurance agreement. 8.This Agreement shall apply only to reinsurance agreements entered into, amended, or renewed on or after the date on which a measure that reduces collateral pursuant to this Article takes effect, and only with respect to losses incurred and reserves reported from and after the later of (i) the date of the measure, or (ii) the effective date of such new reinsurance agreement, amendment, or renewal. Nothing in this Agreement shall limit or in any way alter the capacity of parties to any reinsurance agreement to renegotiate such reinsurance agreement. 9.For greater clarity, in the event of termination of this Agreement, nothing in this Agreement prevents supervisory authorities, or other competent authorities, from requiring the local presence of assuming reinsurers, or requiring posting of collateral and related requirements, or compliance with other provisions of applicable law, with respect to any liabilities under reinsurance agreements described in this Agreement. For the purposes of Articles 9 and 10, the Parties set forth the following practices of group supervision: (a)Without prejudice to subparagraphs (c) to (h) and participation in supervisory colleges, a Home Party insurance or reinsurance group is subject only to worldwide insurance group supervision including worldwide group governance, solvency and capital, and reporting, as applicable, by its Home supervisory authorities, and is not subject to group supervision at the level of the worldwide parent undertaking of the insurance or reinsurance group by any supervisory authority. L 258/10 (b)Notwithstanding subparagraph (a), supervisory authorities may exercise supervision with regard to a Home Party insurance or reinsurance group as set out in subparagraphs (c) to (h). supervisory authorities may exercise group supervision, where appropriate, with regard to a Home Party insurance or reinsurance group at the level of the parent undertaking in its territory. supervisory authorities do not otherwise exercise worldwide group supervision with regard to a Home Party insurance or reinsurance group, without prejudice to group supervision of the insurance or reinsurance group at the level of the parent undertaking in the territory of the . (c)Where a worldwide risk management system, as evidenced by the submission of a worldwide group Own Risk and Solvency Assessment (), is applied to a Home Party insurance or reinsurance group according to the applicable law, the Home supervisory authority that requires the provides a summary of the worldwide group : (i)to the supervisory authorities, if they are members of the insurance or reinsurance group's supervisory college, without delay, and; (ii)to the supervisory authorities of significant subsidiaries or branches of that group in the , at the request of those supervisory authorities. Where no such worldwide group is applied to a Home Party insurance or reinsurance group, according to applicable law, the relevant U.S. State or EU Member State's supervisory authority provides equivalent documentation which is prepared consistent with applicable law of the Home supervisory authority as referred to in sub paragraphs (i) and (ii) above. (d)The summary of the worldwide group , or the equivalent documentation as set out in subparagraph (c), includes the following elements: (i)a description of the insurance or reinsurance group's risk management framework; (ii)an assessment of the insurance or reinsurance group's risk exposure; and (iii)a group assessment of risk capital and a prospective solvency assessment. (e)Notwithstanding subparagraph (a), if the summary of the worldwide group , or, where applicable, equivalent documentation as set out in subparagraph (c), exposes any serious threat to policyholder protection or financial stability in the territory of the supervisory authority, that supervisory authority may impose preventive, corrective, or otherwise responsive measures with respect to insurers or reinsurers in the . Prior to imposing such measures, the supervisory authority consults the insurance or reinsurance group's relevant Home supervisory authority. The Parties encourage supervisory authorities to continue to address insurance group supervision matters within supervisory colleges. (f)insurance group supervision reporting requirements as set out in the applicable law in the territory of the do not apply at the level of the worldwide parent undertaking of the insurance or reinsurance group unless they directly relate to the risk of a serious impact on the ability of undertakings within the insurance or reinsurance group to pay claims in the territory of the . (g)A supervisory authority retains the ability to request and obtain information from an insurer or reinsurer pursuing activities in its territory, whose worldwide parent undertaking has its head office in the territory of the Home Party, for purposes of insurance group supervision, where such information is deemed necessary by the supervisory authority to protect against serious harm to policyholders or serious threat to financial stability or a serious impact on the ability of an insurer or reinsurer to pay its claims in the territory of the supervisory authority. The supervisory authority bases such information request on supervisory criteria and, whenever possible, avoids burdensome and duplicative requests. The requesting supervisory authority informs the supervisory college of such a request. Notwithstanding subparagraph (a), the failure of an insurer or reinsurer to comply with such an information request may result in preventive, corrective or otherwise responsive measures being imposed within the supervisory authority's territory. L 258/11 (h)With regard to a Home Party insurance or reinsurance group with operations in the and that is subject to a group capital assessment in the Home Party which fulfils the following conditions: (i)the group capital assessment includes a worldwide group capital calculation capturing risk at the level of the entire group, including the worldwide parent undertaking of the insurance or reinsurance group, which may affect the insurance or reinsurance operations and activities occurring in the territory of the other Party; and (ii)the supervisory authority in the territory of the Party where the group capital assessment as set out in subparagraph (i) above is applied has the authority to impose preventive, corrective, or otherwise responsive measures on the basis of the assessment, including requiring, where appropriate, capital measures; the supervisory authority does not impose a group capital assessment or requirement at the level of the worldwide parent undertaking of the insurance or reinsurance group according to the applicable law in its territory. Where a Home Party insurer or reinsurer is subject to a group capital requirement in the territory of the Home Party, the supervisory authority does not impose a group capital requirement or assessment at the level of the worldwide parent undertaking of the insurance or reinsurance group. (i)Notwithstanding any provision in this Agreement, this Agreement does not and is not intended to limit or restrict the ability of EU supervisory authorities to exercise supervisory or regulatory authority over entities or groups that own or control credit institutions in the EU, have banking operations in the EU, or whose material financial distress or the nature, scope, size, scale, concentration, interconnectedness or mix of activities have been determined could pose a threat to the financial stability of the EU, including through exercise of: Directive 2002/87/EC of Parliament and of the Council of on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of Parliament and of the Council, Directive 2013/36/EU of Parliament and of 2013 on access to the activity of credit institutions and the supervision of credit institutions and investment firms amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (CRD IV), Regulation (EU) No 575/2013 of Parliament and of 2013 on requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (CRR), Directive 2014/59/EU of Parliament and of 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of Parliament and of the Council, Regulation (EU) No 806/2014 of Parliament and of 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a and amending Regulation (EU) No 1093/2010 and Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on concerning policies relating to the supervision of credit institutions, or other related laws and regulations.