Arizona Administrative Code › Title 20 - COMMERCE, FINANCIAL INSTITUTIONS, AND INSURANCE › Chapter 06 - DEPARTMENT OF INSURANCE AND FINANCIAL INSTITUTIONS - INSURANCE DIVISION › Article 16 - CREDIT FOR REINSURANCE › Part A - CREDIT FOR REINSURANCE › Section R20-6-A1605 - Credit for Reinsurance - Certified Reinsurers

Current through Register Vol. 30, No. 28, July 12, 2024
A. Pursuant to A.R.S. §§
										20-261.05(F), (G) and
				  (H), A.R.S. §§
										20-3602(G),
				  the Director shall allow credit for reinsurance ceded by a domestic insurer to
				  an assuming insurer that has been certified as a reinsurer in Arizona at all
				  times for which statutory financial statement credit for reinsurance is claimed
				  under this Section. The credit allowed shall be based upon the security held by
				  or on behalf of the ceding insurer in accordance with a rating assigned to the
				  certified reinsurer by the Director. The security shall be in a form consistent
				  with the provisions of A.R.S. §§
										20-261.05(F), (G) and
				  (H),
				  20-261.06
				  A.R.S. §§
										20-3602(G),
				  and 20-3603 and Sections
				  R20-6-1608,
				  R20-6-1609
				  or
				  R20-6-1610.
				  R20-6-A1608 or R20-6-A1609(A). The amount of security required in order for
				  full credit to be allowed shall correspond with the following requirements:
1. Ratings
Security Required
Secure-1
0%
Secure-2
10%
Secure-3
20%
Secure-4
50%
Secure-5
75%
Vulnerable-6
100%
2. Affiliated
				  reinsurance transactions shall receive the same opportunity for reduced
				  security requirements as all other reinsurance transactions.
3. The Director shall require the certified
				  reinsurer to post 100%, for the benefit of the ceding insurer or its estate,
				  security upon the entry of an order of rehabilitation, liquidation, or
				  conservation against the ceding insurer.
4. In order to facilitate the prompt payment
				  of claims, a certified reinsurer shall not be required to post security for
				  catastrophe recoverables for a period of one year from the date of the first
				  instance of a liability reserve entry by the ceding company as a result of a
				  loss from a catastrophic occurrence as recognized by the Director. The one year
				  deferral period is contingent upon the certified reinsurer continuing to pay
				  claims in a timely manner. Reinsurance recoverables for only the following
				  lines of business as reported on the NAIC annual financial statement related
				  specifically to the catastrophic occurrence will be included in the deferral:
a. Line 1: Fire
b. Line 2: Allied Lines
c. Line 3: Farmowners multiple
				  peril
d. Line 4: Homeowners
				  multiple peril
e. Line 5:
				  Commercial multiple peril
f. Line
				  9: Inland Marine
g. Line 12:
				  Earthquake
h. Line 21: Auto
				  physical damage
5.
				  Credit for reinsurance under this Section shall apply only to reinsurance
				  contracts entered into or renewed on or after the effective date of the
				  certification of the assuming insurer. Any reinsurance contract entered into
				  prior to the effective date of the certification of the assuming insurer that
				  is subsequently amended after the effective date of the certification of the
				  assuming insurer, or a new reinsurance contract covering any risk for which
				  collateral was provided previously, shall only be subject to this Section with
				  respect to losses incurred and reserves reported from and after the effective
				  date of the amendment or new contract.
6. Nothing in this Section shall prohibit the
				  parties to a reinsurance agreement from agreeing to provisions establishing
				  security requirements that exceed the minimum security requirements established
				  for certified reinsurers under this Section.