Code of Massachusetts Regulations › 211 CMR - DIVISION OF INSURANCE › Title 211 CMR 130.00 - Credit For Reinsurance › Section 130.06 - Credit for Reinsurance - Reinsurers Maintaining Trust Funds

Current through Register 1525, July 5, 2024
(1) Pursuant to M.G.L. c. 175, §
			 20A(1)(D) 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 U.S. financial institution as defined in
			 M.G.L. c. 175, § 20A(3)(B), for the payment of the valid claims of its
			 U.S. domiciled 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 National Association of
			 Insurance Commissioners (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 U.S. domiciled
			 insurers, and in addition, the assuming insurer shall maintain a trusteed
			 surplus of not less than $20,000,000, except as provided in 211 CMR
			 130.06(2)(b).
(b) At any time after
			 the assuming insurer has permanently discontinued underwriting new business
			 secured by the trust fund 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 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:
a. For
			 reinsurance ceded under reinsurance agreements with an inception, amendment or
			 renewal date on or after January 1, 1993, funds in trust in an amount not less
			 than the respective underwriters' several liabilities attributable to business
			 ceded by U.S. domiciled ceding insurers to any underwriter of the
			 group;
b. For reinsurance ceded
			 under reinsurance agreements with an inception date on or before December 31,
			 1992, and not amended or renewed after that date, notwithstanding the other
			 provisions of
			 211 CMR
			 130.00, 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; and
c. In addition to these trusts, the group
			 shall maintain a trusteed surplus of which $100,000,000 shall be held jointly
			 for the benefit of the U.S. domiciled ceding insurers of any member of the
			 group for all the years of account.
2. 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 90 days after its financial statements are due to be filed
			 with the group's domiciliary regulator, provide to the commissioner:
a. An annual certification by the group's
			 domiciliary regulator of the solvency of each underwriter member of the group;
			 or
b. 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 years immediately prior to making
			 application for accreditation, shall:
a.
			 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 and;
b.
			 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;
			 and
c. File a properly executed
			 Form AR-1 found at
www.mass.gov/doi
as
			 evidence of the submission to the Commonwealth'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 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.