Michigan Administrative Code › Department - Insurance and Financial Services › Insurance › Credit for Reinsurance › Section R. 500.1123 - Conditions applicable to a reinsurance agreement in conjunction with a trust agreement under section 1105 of the code, MCL 500.1105

Current through Vol. 24-12, July 15, 2024
Rule 3.
(1) A
				reinsurance agreement that is entered into in conjunction with a trust
				agreement under section 1105 of the code, MCL 500.1105, may contain any of the
				following provisions:
(a) A requirement that
				the assuming insurer enter into a trust agreement, establish a trust account
				for the benefit of the ceding insurer, and specify what the agreement is to
				cover.
(b) A stipulation that
				assets deposited in the trust account must be valued according to their current
				fair market value and consist only of cash (United States legal tender),
				certificates of deposit issued by a United States bank and payable in United
				States legal tender, and investments of the types permitted by chapter 9 of the
				code, MCL 500.901 to 500.947, or any combination of cash, certificates of
				deposit, or investments specified in this subrule, if the investments are
				issued by an entity that is not the parent, subsidiary, or affiliate of either
				the grantor or the beneficiary. The reinsurance agreement may further specify
				the types of investments to be deposited. If a trust agreement is entered into
				in conjunction with a reinsurance agreement covering risks other than life,
				annuities, and accident and health, then the trust agreement may contain the
				provisions required by this subdivision instead of including the provisions in
				the reinsurance agreement.
(c) A
				requirement that the assuming insurer, before depositing assets with the
				trustee, execute assignments or endorsements in blank or transfer legal title
				to the trustee of all shares, obligations, or any other assets requiring
				assignments, so that the ceding insurer, or the trustee upon the direction of
				the ceding insurer, may, if necessary, negotiate the assets without the consent
				or signature from the assuming insurer or any other entity.
(d) A requirement that all settlements of
				account between the ceding insurer and the assuming insurer be made in cash or
				its equivalent.
(e) A stipulation
				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 by the ceding insurer at any time, notwithstanding
				any other provisions in the reinsurance agreement, and must be used 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 the company, without diminution because of insolvency on the
				part of the ceding insurer or the assuming insurer, only for 1 or more of the
				following purposes:
(i) To pay or reimburse
				the ceding insurer for the assuming insurer's share under the specific
				reinsurance agreement of premiums returned, but not yet recovered from the
				assuming insurer, to the owners of policies reinsured under the reinsurance
				agreement because of cancellation of the policies.
(ii) To pay or reimburse the ceding insurer
				for the assuming insurer's share of surrenders and benefits or losses paid by
				the ceding insurer pursuant to the provisions of the policies reinsured under
				the reinsurance agreement.
(iii) To
				pay or reimburse the ceding insurer for any other amounts necessary to secure
				the credit or reduction from liability for reinsurance taken by the ceding
				insurer.
(iv) To make payment to
				the assuming insurer of amounts held in the trust account in excess of the
				amount necessary to secure the credit or reduction from liability for
				reinsurance taken by the ceding insurer.