Kentucky Administrative Regulations › Title 806 - PUBLIC PROTECTION CABINET - DEPARTMENT OF INSURANCE › Chapter 5 - Kinds of Insurance; Limits of Risk; Reinsurance › Section 806 KAR 5:025 - Credit for reinsurance

Current through Register Vol. 51, No. 1, July 1, 2024
RELATES TO:
				KRS
				61.876,
				61.878,
				304.5-140,
				304.33-350,
				12 U.S.C.
				1703,
				1709,
				1715b, 15
				U.S.C. 78a-78kk, 80a,
				42
				U.S.C. Section 5402(6)
NECESSITY, FUNCTION, AND CONFORMITY:
				KRS
				304.2-110 authorizes the commissioner to make
				reasonable rules and regulations necessary for or as an aid to the effectuation
				of any provision of the Kentucky Insurance Code, KRS Chapter 304.
				KRS
				304.5-140 authorizes the commissioner to
				promulgate administrative regulations to implement the provisions of that
				section. This administrative regulation implements
				KRS
				304.5-140 by establishing credit for
				reinsurance.
Section 1. Definitions.
(1) "Additional information required by the
			 commissioner" means any supplementary information directly related to the
			 requirements specified by statute and this administrative regulation, that is
			 necessary to ensure that the requirements specified by statute and this
			 administrative regulation are being met, and does not add additional
			 requirements not specified by statute and this administrative
			 regulation.
(2) "Beneficiary"
			 means:
(a) The entity for whose sole benefit
			 the trust has been established and any successor of the beneficiary by
			 operation of law; and
(b) If a
			 court of law appoints a successor in interest to the named beneficiary, the
			 named beneficiary is the court appointed domiciliary receiver, including the
			 conservator, rehabilitator, or liquidator.
(3) "Evergreen clause" means a provision in a
			 letter of credit or its confirmation that prevents the expiration of the letter
			 of credit or its confirmation without written notice to the beneficiary from
			 the issuing or confirming bank or trust company as provided by this
			 administrative regulation.
(4)
			 "Grantor" means:
(a) The entity that has
			 established a trust for the sole benefit of the beneficiary; and
(b) If the trust is established in
			 conjunction with a reinsurance agreement, the unlicensed, unaccredited assuming
			 insurer.
(5)
			 "Liabilities" means the assuming insurer's gross liabilities attributable to
			 reinsurance ceded by U.S. domiciled insurers excluding liabilities that are
			 otherwise secured by acceptable means.
(6) "Mortgage-related security" means an
			 obligation that is rated AA or higher, or the equivalent, by a securities
			 rating agency recognized by the Securities Valuation Office of the NAIC and
			 that:
(a) Represents ownership of one (1) or
			 more promissory notes or certificates of interest or participation in the
			 notes, including any rights designed to assure servicing of, or the receipt or
			 timeliness of receipt by the holders of the notes, certificates, or
			 participation of amounts payable under, the notes, certificates, or
			 participation, that:
1. Are directly secured
			 by a first lien on a single parcel of real estate, including stock allocated to
			 a dwelling unit in a residential cooperative housing corporation, upon which is
			 located a dwelling or mixed residential and commercial structure, or on a
			 residential manufactured home as defined in
			 42
			 U.S.C. Section 5402(6),
			 whether the manufactured home is considered real or personal property under the
			 laws of the state in which it is located; and
2. Were originated by a savings and loan
			 association, savings bank, commercial bank, credit union, insurance company, or
			 similar institution that is supervised and examined by a federal or state
			 housing authority, or by a mortgagee approved by the Secretary of Housing and
			 Urban Development pursuant to
			 12 U.S.C. Sections
			 1709 and
			 1715b, or,
			 where the notes involve a lien on the manufactured home, by an institution or
			 by a financial institution approved for insurance by the Secretary of Housing
			 and Urban Development pursuant to
			 12 U.S.C. Section
			 1703; or
(b) Is secured by one (1) or more promissory
			 notes or certificates of deposit or participations in the notes, with or
			 without recourse to the insurer of the notes, and by its terms provides for
			 payments of principal in relation to payments, or reasonable projections of
			 payments, or notes meeting the requirements of paragraph (a) of this
			 subsection.
(7)
			 "Obligations" means:
(a) Reinsured losses and
			 allocated loss expenses paid by the ceding company, but not recovered from the
			 assuming insurer;
(b) Reserves for
			 reinsured losses reported and outstanding;
(c) Reserves for reinsured losses incurred,
			 but not reported; and
(d) Reserves
			 for allocated reinsured loss expenses and unearned premiums.
(8) "Promissory note" means, when
			 used in connection with a manufactured home, a loan, or advance or credit sale,
			 as evidenced by a retail installment sales contract or other
			 instrument.
(9) "Solvent scheme of
			 arrangement" means a foreign or alien statutory or regulatory compromise
			 procedure subject to requisite majority creditor approval and judicial sanction
			 in the assuming insurer's home jurisdiction either to finally commute
			 liabilities of duly noticed classed members or creditors of a solvent debtor,
			 or to reorganize or restructure the debts and obligations of a solvent debtor
			 on a final basis, and which may be subject to judicial recognition and
			 enforcement of the arrangement by a governing authority outside the ceding
			 insurer's home jurisdiction.