New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter IV - Financial Condition Of Insurer and Reports to Superintendent › Subchapter C - Fire, Marine, Casualty And Surety Insurers › Part 112 - Loss Portfolio Transfers › Section 112.5 - Requirements

Current through Register Vol. 46, No. 28, July 10, 2024
Except that there must be compliance with the requirements
					 of subdivisions (a) and (j) of this section, in every agreement irrespective of
					 when executed or entered into, no credit shall be allowed in annual or interim
					 statements required to be filed by such transferer or transferee in New York
					 where the agreement has been executed or entered into after November 30, 1984,
					 unless each of the following conditions is satisfied:
(a) The agreement shall provide that the
				  obligations of the transferee are payable on the basis of the liability of the
				  transferer without diminution because of the insolvency of the
				  transferer.
(b) The agreement shall
				  be noncancellable, except at the discretion of the superintendent acting as
				  rehabilitator, liquidator or receiver of the transferer or
				  transferee.
(c) The agreement shall
				  not contain terms permitting, or operate to permit, the transferee to exercise
				  influence over the claim settlement practices and procedures of the transferer
				  by delay of payment of balances due or otherwise, except that, subject to the
				  ultimate responsibility of the transferer, the transferee may participate in
				  the defense of claims in a manner that shall not constitute unfair claim
				  settlement practices.
(d)
				  Recoveries due the transferer must be available without delay for payment of
				  losses and claim obligations incurred under the agreement, in a manner not
				  inconsistent with orderly payment of incurred policy obligations by the
				  transferer.
(e) The agreement shall
				  constitute the entire contract between the parties, and must provide no
				  guarantees of any kind to the transferee by or on behalf of the transferer,
				  whether directly, by side agreement, or otherwise.
(f) The agreement must provide for quarterly
				  reports by the transferer to the transferee, setting forth the transferer's
				  total loss and loss expense reserves on the policy obligations subject to the
				  agreement, so that the respective obligations of transferer and transferee will
				  be recorded and reported on a consistent basis in their respective annual and
				  interim statements required to be filed in New York.
(g) The consideration to be paid by the
				  transferer for the loss portfolio transfer must be a certain sum stated in the
				  agreement.
(h) Direct or indirect
				  commissions to the transferer or transferee are prohibited.
(i) Any provision for subsequent adjustment
				  on the basis of actual experience in regard to the policy obligations
				  transferred, or on the basis of any other formula, is prohibited in connection
				  with a loss portfolio transfer, except that provision may be made for the
				  transferer's participation in the transferee's ultimate profit, if any, under
				  the agreement.
(j) If the
				  transferee is not an authorized insurer or an accredited reinsurer in New York,
				  a Letter of Credit acceptable under the terms of Part 79 of this Title
				  (Regulation 133) must be furnished, or funds must be held by the transferer in
				  a manner consistent with Part 126 of this Title (Regulation 114) and section 1301 (a)(14)  of the
				  Insurance Law, in the amount of the remaining obligations of the transferee to
				  the transferer under the agreement.