2023 New York Laws › ISC - Insurance › Article 13 - Assets and Deposits › 1308 - Reinsurance, When Permitted; Effect on Reserves.

§  1308.  Reinsurance, when permitted; effect on reserves. (a) (1) Any
authorized  insurer,  hereinafter  called  the  "ceding  insurer",  may,
subject  to  the  limitations  of  this  chapter, reinsure its risks and
policy liabilities in any other assuming insurer with the effects herein
prescribed.  No  prohibition  or  limitation  in  this   chapter   shall
invalidate any reinsurance agreement as between the parties thereto.
(2)  (A) No credit shall be allowed, as an admitted asset or deduction
from liability, to any ceding insurer for reinsurance ceded, renewed, or
otherwise becoming  effective  after  January  first,  nineteen  hundred
forty, unless:
(i)  the  reinsurance  shall be payable by the assuming insurer on the
basis of the  liability  of  the  ceding  insurer  under  the  contracts
reinsured  without  diminution  because  of the insolvency of the ceding
insurer, and
(ii)  under  the  reinsurance  agreement  the   liability   for   such
reinsurance  is assumed by the assuming insurer as of the same effective
date.
(B) Except as provided by subsection (a) of section four thousand  one
hundred  eighteen  of  this chapter, no such credit shall be allowed any
ceding insurer for reinsurance ceded,  renewed,  or  otherwise  becoming
effective  after September first, nineteen hundred fifty-two, unless the
reinsurance agreement provides that payments  by  the  assuming  insurer
shall be made directly to the ceding insurer or its liquidator, receiver
or statutory successor, except where:
(i)  the  agreement specifies another payee of such reinsurance in the
event of the insolvency of the ceding insurer, or
(ii) the assuming insurer with the consent of the direct insureds  has
assumed  such  policy  obligations  of  the ceding insurer as its direct
obligations to the payees under such policies, in substitution  for  the
obligations of the ceding insurer to such payees.
(3)  Such  reinsurance  agreement  may  provide  that  the liquidator,
receiver or statutory successor of an  insolvent  ceding  insurer  shall
give  written  notice of the pendency of a claim against such insurer on
the contract reinsured within a reasonable  time  after  such  claim  is
filed  in the insolvency proceeding and that during the pendency of such
claim any assuming insurer may investigate such claim and interpose,  at
its own expense, in the proceeding where such claim is to be adjudicated
any  defenses  which  it  deems  available  to  the  ceding company, its
liquidator, receiver or  statutory  successor.  Such  expense  shall  be
chargeable  subject  to  court  approval  against  the  insolvent ceding
insurer as part of the  expense  of  liquidation  to  the  extent  of  a
proportionate  share  of  the  benefit  which  may  accrue to the ceding
insurer solely as a result of the defense  undertaken  by  the  assuming
insurer.  Where  two  or more assuming insurers are involved in the same
claim and a majority in interest elect  to  interpose  defense  to  such
claim,  the expense shall be apportioned in accordance with the terms of
the reinsurance agreement as though such expense had  been  incurred  by
the ceding company.
(b)  In  determining  the  ceding  insurer's  financial  condition, if
reinsurance is effected by the ceding insurer in any  assuming  insurer,
the  ceding insurer shall, in addition to any credit allowed against its
loss reserves,  and  any  reduction  of  reserves  allowed  pursuant  to
paragraph  nine  of subsection (a) of section one thousand three hundred
one of this  article  for  reinsurance  recoverable  from  insurers  not
authorized  in  this state, receive credit for reinsurance effected with
any assuming insurer authorized to  do  such  business  in  this  state,
calculated as follows:
(1)  as to reinsurance of all or any part of any risk not specified in
paragraph two hereof, by way of  deduction  from  its  unearned  premium
liability  calculated  in  accordance with the provisions of section one
thousand three hundred five of this article; or
(2)  as  to  reinsurance  of  all or any part of any life insurance or
annuity or non-cancellable disability risk, by way of deduction from its
reserve liability, in  an  amount  not  exceeding  the  reserve  on  the
reinsured  portion  of  such  risk  which  the ceding insurer would have
maintained if such portion had not been reinsured.
(c) Nothing in this section shall  be  deemed  to  permit  the  ceding
insurer  to  receive  through the cession of all or any part of any risk
any advantage whereby its unearned premium reserve, or the net amount of
its valuation reserves, is reduced below the  amount  required  by  this
chapter.
(d) In determining its financial condition, any assuming insurer shall
be charged:
(1)  in  its  unearned  premium  liability with an amount equal to the
deduction specified in paragraph one of subsection (b) hereof, and
(2) in its valuation reserve liability with an amount at  least  equal
to  the amount which it would be required to maintain in accordance with
the provisions of this chapter if it were the  direct  insurer  of  such
assumed risks on the basis specified in the reinsurance agreement.
(e)  (1)  During  any period of twelve consecutive months, without the
superintendent's permission:
(A) no  domestic  insurer,  except  life,  shall  by  any  reinsurance
agreement  or  agreements  cede  an amount of its insurance on which the
total gross reinsurance premiums are more  than  fifty  percent  of  the
unearned  premiums  on  the  net amount of its insurance in force at the
beginning of such period, and
(B) no alien insurer, except life, shall by any reinsurance  agreement
or  agreements,  involving the withdrawal or transfer of any interest in
any of its trusteed assets in the United States, cede an amount  of  its
insurance  on  which  the total gross reinsurance premiums are more than
fifty percent of  the  unearned  premiums  on  the  net  amount  of  its
insurance  in  force  in  the  United  States,  at the beginning of such
period.
(2) Paragraph one hereof shall not apply to reinsurance  made  in  the
ordinary  course of business reinsuring specified individual risks under
reinsurance agreements relating to current business.
(3) If any agreement or agreements at any time effect  reinsurance  of
substantially  all of the net insurance in force of such ceding insurer,
no credit by way of deduction pursuant to subsection (b) hereof shall be
allowed to such ceding insurer, unless either:
(A) the assuming insurer or insurers assume or have assumed the policy
obligations of the ceding insurer as their  direct  obligations  to  the
obligees  under  such  policies  and the provisions for cancellation, if
any,  of  such  reinsurance  agreements  have  been  approved   by   the
superintendent, or
(B)  such  reinsurance agreement or agreements were made under pooling
arrangements between insurers associated in  a  group  for  underwriting
purposes  and  were  approved by the superintendent as not impairing the
protection of policyholders of such ceding or assuming insurers.
(f) (1) Unless the superintendent permits:
(A) No domestic life insurance company shall (i)  reinsure  its  whole
risk  on  any  individual  life  or  joint  lives,  or  (ii)  reinsure a
substantial portion of its life insurance in force.
(B) No foreign or alien insurer shall reinsure its whole risk  on  any
individual  life  or  joint  lives,  written  under a policy or contract
delivered or issued for delivery in this state.
(2)  Any  domestic  life  insurance  company  proposing  to  assume by
reinsurance all or any  part  of  the  business  in  force,  other  than
portions  of  individual  risks,  of any domestic, foreign or alien life
insurance company,  fraternal  benefit  society  or  other  organization
having  outstanding  policies  or  certificates  of  life  insurance  or
accident and health insurance or annuity contracts  shall  make  written
application  to the superintendent for permission to do so. If after due
consideration  the  superintendent  is  satisfied  that   the   proposed
reinsurance  will  not  prejudice  the interests of the policyholders of
either the applicant or the companies  that  are  members  of  The  Life
Insurance  Guaranty  Corporation  or  of  The  Life and Health Insurance
Company Guaranty Corporation of New York, the superintendent shall grant
the permission.
(3) The superintendent, after notice to and an opportunity to be heard
by all domestic life insurance companies, may issue  and  from  time  to
time  amend  regulations  establishing  standards  which tend to promote
orderly growth and financial stability among the companies and otherwise
effectuate the purposes of this subsection.
(g) Any domestic life insurance company which has  discontinued  doing
any  new  business  in a foreign country may, with the permission of the
superintendent, reinsure all or any part of  its  risks  outstanding  in
such  country  in  any  solvent  insurer authorized to transact business
therein. Thereafter such life insurance company shall not be required to
charge as liabilities the reserves and other liabilities  pertaining  to
the reinsured risks.