Code of Maine Rules › 02 - DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION › 031 - BUREAU OF INSURANCE › Chapter 740 - CREDIT FOR REINSURANCE › Section 031-740-15 - Reinsurance contracts - permitted provisions

Current through 2024-29, July 17, 2024
I.
				A reinsurance agreement, the administration of which employs a trust account
				subject to Section
				12, may contain provisions that:
A. Require the assuming insurer to enter into
				a trust agreement and to establish a trust account for the benefit of the
				ceding insurer, and that specify what the agreement is to cover;
B. Specify trust investment standards in a
				manner consistent with Subsection
				12(L). An investment
				clause consistent with Subsection
				12(L) is mandatory
				if it is not contained in the trust agreement or if the reinsurance agreement
				covers life, annuity, or health risks;
C. Require the assuming insurer, prior to
				depositing assets with the trustee, to execute assignments or endorsements in
				blank, or to transfer legal title to the trustee of all shares, obligations, or
				any other assets requiring assignments, in order that the ceding insurer, or
				the trustee upon the direction of the ceding insurer, may whenever necessary
				negotiate these assets without consent or signature from the assuming insurer
				or any other entity;
D. Require
				that all settlements of account between the ceding insurer and the assuming
				insurer be made in cash or its equivalent; and
E. Stipulate that the assuming insurer and
				the ceding insurer agree that the assets in the trust account, established
				pursuant to the provisions of the reinsurance agreement, may be withdrawn at
				any time by the ceding insurer, notwithstanding any other provisions in the
				reinsurance agreement, and may further stipulate that the funds withdrawn shall
				be utilized and applied by the ceding insurer (or its successors in interest by
				operation of law, including without limitation any liquidator, rehabilitator,
				receiver, or conservator of such company), on the basis of the liability of the
				ceding insurer under the contracts reinsured without diminution because of the
				insolvency of the ceding insurer or assuming insurer, only for the following
				purposes:
(1) To reimburse the ceding insurer
				for the assuming insurer's share of premiums returned to the owners of policies
				reinsured under the reinsurance agreement because of cancellations of such
				policies;
(2) To reimburse the
				ceding insurer for the assuming insurer's share of policy surrenders and
				benefits or losses paid by the ceding insurer pursuant to the provisions of the
				policies reinsured under the reinsurance agreement; and
(3) To pay any obligations, consistent with
				the terms of the reinsurance agreement, which the ceding insurer has reasonably
				calculated to be due to it. The agreement may contain provisions that also
				allow the ceding insurer to fund one or more accounts specifically established
				by the ceding insurer, under standards specified in the agreement, for the
				payment of certain obligations incurred but not yet due.
F. Give the assuming insurer the right to
				seek approval from the ceding insurer, which shall not unreasonably or
				arbitrarily withhold its approval, to withdraw from the trust account all or
				any part of the trust assets and transfer those assets to the assuming insurer,
				provided:
(1) The assuming insurer shall, at
				the time of withdrawal, replace the withdrawn assets with other qualified
				assets having a current fair market value at least equal to the greater of the
				market value of the assets withdrawn or the amount necessary to restore the
				funding of the trust to the required amount, or
(2) After withdrawal and transfer, the
				current fair market value of qualified assets in the trust account is no less
				than 102 percent of the required amount.
G. Give the assuming insurer the right to:
(1) The return of any amount withdrawn in
				excess of the actual amounts required for Paragraphs E(1) or (2) of this part,
				or in the case of Paragraph E(3), any amounts determined not to be a permitted
				withdrawal pursuant to a final accounting between the parties to the agreement;
				and
(2) Interest payments, at a
				rate not in excess of the prime rate of interest applicable to the period or
				periods during which the amounts returned pursuant to Paragraph (1) were
				held.
H. Permit the
				award by an arbitration panel or any court of competent jurisdiction of:
(1) Interest at a rate different from that
				provided in Paragraph G(2) of this part;
(2) Court or arbitration costs;
(3) Attorney's fees; and
(4) Other reasonable expenses.