California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 3 - Insurers › Article 3 - Annual Statements › Premiums in Course of Collection › Section 2303.27 - Term and Universal Life Insurance Reserve Financing, Requirements for Covered Policies to Obtain Credit for Reinsurance; Opportunity for Remediation

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Subject to the
					 exemptions described in Section
					 2303.25 of this article and the
					 provisions of Section
					 2303.27(b) of
					 this article, credit for reinsurance shall be allowed with respect to ceded
					 liabilities pertaining to Covered Policies pursuant to Code Sections
					 922.4 and
					 922.5 if, and only if, in addition
					 to all other requirements imposed by law or regulation, the following
					 requirements are met on a treaty by treaty basis:
1. The ceding insurer's statutory policy
					 reserves with respect to the Covered Policies are established in full and in
					 accordance with the applicable requirements of Article 3a of Chapter 5 of Part
					 2 of Division 2 of the Insurance Code, commencing at Section
					 10489.1, and related regulations,
					 in Articles 12.3 and 12.4 of Subchapter 3 of Chapter 5 of Title 10 of the
					 California Code of Regulations, commencing at Sections
					 2542 and
					 2544, respectively, and actuarial
					 guidelines in the NAIC Valuation Manual, and credit claimed for any reinsurance
					 treaty subject to Sections
					 2303.23 through
					 2303.28 of this article does not
					 exceed the proportionate share of those reserves ceded under the contract;
					 and
2. The ceding insurer
					 determines the Required Level of Primary Security with respect to each
					 reinsurance treaty subject to Sections
					 2303.23 through
					 2303.28 of this article and
					 provides support for its calculation as determined to be acceptable to the
					 commissioner; and
3. Funds
					 consisting of Primary Security, in an amount at least equal to the Required
					 Level of Primary Security, are held by or on behalf of the ceding insurer, as
					 security under the reinsurance treaty within the meaning of Code Section
					 922.5, on a funds withheld, trust,
					 or modified coinsurance basis; and
4. Funds consisting of Other Security, in an
					 amount at least equal to any portion of the statutory reserves as to which
					 Primary Security is not held pursuant to paragraph 3 above, are held by or on
					 behalf of the ceding insurer as security under the reinsurance treaty within
					 the meaning of Code Section
					 922.5; and
5. Any trust used to satisfy the requirements
					 of this section
					 2303.27 shall comply with all of
					 the conditions and qualifications of section
					 2303.7 of this article, except
					 that:
A. Funds consisting of Primary Security
					 or Other Security held in trust shall, for the purposes identified in section
					 2303.26(b) of
					 this article, be valued according to the valuation rules set forth in section
					 2303.26(b) of
					 this article, as applicable; and
B.
					 There are no affiliate investment limitations with respect to any security held
					 in such trust if such security is not needed to satisfy the requirements of
					 section 2303.27(a)(3) of
					 this article; and
C. The
					 reinsurance treaty must prohibit withdrawals or substitutions of trust assets
					 that would leave the fair market value of the Primary Security within the trust
					 (when aggregated with Primary Security outside the trust that is held by or on
					 behalf of the ceding insurer in the manner required by section
					 2303.27(a)(3) of
					 this article) below 102% of the level required by section
					 2303.27(a)(3) of
					 this article at the time of the withdrawal or substitution; and
D. The determination of reserve credit under
					 Section 2303.7(g) of this
					 article, shall be determined according to the valuation rules set forth in
					 section 2303.26(b) of
					 this article, as applicable; and
6. The reinsurance treaty has been approved
					 by the commissioner.