Alabama Administrative Code › Title 482 - ALABAMA DEPARTMENT OF INSURANCE › Chapter 482-1-156 - CREDIT FOR REINSURANCE › Section 482-1-156-.07 - Credit For Reinsurance - Reinsurers Maintaining Trust Funds

Current through Register Vol. 42, No. 9, June 28, 2024
(1) Pursuant to
			 Section 27-5B-7, 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
			 United States financial institution as defined in Section
			 27-5B-15, for the payment of the
			 valid claims of its United States 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 NAIC
			 annual statement form by licensed insurers, to enable the Commissioner to
			 determine the sufficiency of the trust fund.
(2) The following requirements apply to the
			 following categories of assuming insurer:
(a)
			 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 United States domiciled insurers, and in addition, the
			 assuming insurer shall maintain a trusteed surplus of not less than
			 $20,000,000, except as provided in paragraph (b).
(b) At any time after the assuming insurer
			 has permanently discontinued underwriting new business secured by the trust for
			 at least three full years, the commissioner with principal regulatory oversight
			 of the trust may authorize a reduction in the required trusteed surplus, but
			 only after a finding, based on an assessment of the risk, that the new required
			 surplus level is adequate for the protection of U.S. ceding insurers,
			 policyholders and claimants in light of reasonably foreseeable adverse loss
			 development. The risk assessment may involve an actuarial review, including an
			 independent analysis of reserves and cash flows, and shall consider all
			 material risk factors, including when applicable the lines of business
			 involved, the stability of the incurred loss estimates and the effect of the
			 surplus requirements on the assuming insurer's liquidity or solvency. The
			 minimum required trusteed surplus may not be reduced to an amount less than
			 thirty percent (30%) of the assuming insurer's liabilities attributable to
			 reinsurance ceded by U.S. ceding insurers covered by the trust.
(c)
1. The
			 trust fund for a group including incorporated and individual unincorporated
			 underwriters shall consist of one of the following:
(i) 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 respective underwriters'
			 several liabilities attributable to business ceded by United States domiciled
			 ceding insurers to any underwriter of the group.
(ii) 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
			 regulation, funds in trust in an amount not less than the respective
			 underwriters' several insurance and reinsurance liabilities attributable to
			 business written in the United States.
2. In addition to the trusts required in
			 subparagraph 1, the group shall maintain a trusteed surplus of which
			 $100,000,000 shall be held jointly for the benefit of the United States
			 domiciled ceding insurers of any member of the group for all the years of
			 account.
3. 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 ninety (90) days after its
			 financial statements are due to be filed with the group's domiciliary
			 regulator, provide to the Commissioner either of the following:
(i) An annual certification by the group's
			 domiciliary regulator of the solvency of each underwriter member of the
			 group.
(ii) If a certification is
			 unavailable, a financial statement, prepared by independent public accountants,
			 of each underwriter member of the group.
(d)
1. 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 three (3) years immediately
			 prior to making application for accreditation, shall:
(i) 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.
(ii) 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.
(iii) 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.
2. Within ninety (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.