Connecticut Administrative Code › Title 38a - Insurance Department › 88 - Credit for Reinsurance › Section 38a-88-16 - Requirements Applicable to Covered Policies to Obtain Credit for Reinsurance; Opportunity for Remediation

Current through July 10, 2024
(a)
Requirements.
Subject to the exemptions described in section
			 38a-88-17 of the Regulations of Connecticut State Agencies and the provisions
			 of subsection (b) of this section, credit for reinsurance shall be allowed with
			 respect to ceded liabilities pertaining to covered policies pursuant to
			 sections 38a-85 and 38a-86 of the Connecticut General Statutes if in addition
			 to all other requirements imposed by the Connecticut General Statutes or the
			 Regulations of Connecticut State Agencies, the following requirements are met
			 on a contract-by-contract 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
			 sections 38a-77, 38a-78, 38a-78a and 38a-79 of the Connecticut General Statutes
			 and related regulations and actuarial guidelines, and credit claimed for any
			 reinsurance contract subject to sections 38a-88-13 to 38a-88-19, inclusive, of
			 the Regulations of Connecticut State Agencies does not exceed the proportionate
			 share of those reserves ceded under the contract;
(2) The ceding insurer determines the
			 required level of primary security with respect to each reinsurance contract
			 subject to sections 38a-88-13 to 38a-88-19, inclusive, of the Regulations of
			 Connecticut State Agencies and provides such support for its calculation that
			 the Commissioner determines to be acceptable;
(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 contract
			 within the meaning of section 38a-86 of the Connecticut General Statutes, on a
			 funds withheld, trust or modified coinsurance basis;
(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 subdivision (3) of this subsection,
			 are held by or on behalf of the ceding insurer as security under the
			 reinsurance contract within the meaning of section 38a-86 of the Connecticut
			 General Statutes;
(5) Any trust
			 used to satisfy the requirements of this section shall comply with all of the
			 conditions and qualifications of section
			 38a-88-7
			 of the Regulations of Connecticut State Agencies, except that:
(A) Funds consisting of primary security or
			 other security held in trust shall, for the purposes identified in section
			 38a-88-15(b) of the Regulations of Connecticut State Agencies, be valued
			 according to the valuation rules set forth in section 38a-88-15(b) of the
			 Regulations of Connecticut State Agencies, as applicable;
(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 subdivision (3) of this
			 subsection;
(C) The reinsurance
			 contract 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 subdivision (3) of this
			 subsection) below one hundred two percent (102%) of the level required by
			 subdivision (3) of this subsection at the time of the withdrawal or
			 substitution; and
(D) The
			 determination of reserve credit under subsection (d)(3) of section
			 38a-88-7
			 of the Regulations of Connecticut State Agencies shall be determined according
			 to the valuation rules set forth in section 38a-88-15(b) of the Regulations of
			 Connecticut State Agencies, as applicable; and
(6) The reinsurance contract has been
			 approved by the Commissioner.