New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter IV - Financial Condition Of Insurer and Reports to Superintendent › Subchapter D - Reinsurance › Part 126 - Trust Agreements › Section 126.5 - Additional conditions applicable to reinsurance agreements

Current through Register Vol. 46, No. 28, July 10, 2024
(a) A reinsurance
				  agreement, which is entered into in conjunction with a trust agreement and the
				  establishment of a trust account, must contain provisions that:
(1) require the reinsurer to enter into a
				  trust agreement and to establish a trust account for the benefit of the
				  reinsured, and specifying what recoverables and/or reserves such agreement is
				  to cover;
(2) stipulate that assets
				  deposited in the trust account shall be valued according to their current fair
				  market value, and shall 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 specified in paragraphs (1),
				  (2), (3), (8) and (10) of subsection (a) of section 1404 of the New York
				  Insurance Law, provided that such investments are issued by an institution 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. Where a trust agreement is entered into in
				  conjunction with a reinsurance agreement covering risks other than life,
				  annuities and accident and health, then such trust agreement may contain the
				  provisions required by this paragraph in lieu of including such provisions in
				  the reinsurance agreement;
(3)
				  require the reinsurer, prior to depositing assets with the trustee, to execute
				  assignments, endorsements in blank, or transfer legal title to the trustee of
				  all shares, obligations or any other assets requiring assignments, in order
				  that the ceding company, or the trustee upon the direction of the ceding
				  company, may whenever necessary negotiate any such assets without consent or
				  signature from the reinsurer or any other entity;
(4) require that all settlements of account
				  between the ceding company and the reinsurer be made in cash or its equivalent;
				  and
(5) stipulate that the
				  reinsurer and the ceding company agree that the assets in the trust account,
				  established pursuant to the provisions of the reinsurance agreement, may be
				  withdrawn by the ceding company at any time, notwithstanding any other
				  provisions in the reinsurance agreement, and shall be utilized and applied by
				  the ceding company or any successor by operation of law of the ceding company,
				  including, without limitation, any liquidator, rehabilitator, receiver or
				  conservator of such company, without diminution because of insolvency on the
				  part of the ceding company or the reinsurer, only for the following purposes:
(i) to reimburse the ceding company for the
				  reinsurer's share of premiums returned to the owners of policies reinsurer
				  under the reinsurance agreement on account of cancellations of such
				  policies;
(ii) to reimburse the
				  ceding company for the reinsurer's share of surrenders and benefits or losses
				  paid by the ceding company pursuant to the provisions of the policies reinsured
				  under the reinsurance agreement;
(iii) to fund an account with the ceding
				  company in an amount at least equal to the deduction, for reinsurance ceded,
				  from the ceding company's liabilities for policies ceded under the agreement.
				  Such account shall include, but not be limited to, amounts for policy reserves,
				  reserves for claims and losses incurred (including losses incurred but not
				  reported), loss adjustment expenses, and unearned premiums; and
(iv) to pay any other amounts the ceding
				  company claims are due under the reinsurance agreement.