Oklahoma Administrative Code › Title 365 - Insurance Department › Chapter 25 - Other Licensees › Subchapter 7 - Companies › Part 11 - CREDIT FOR REINSURANCE › Section 365:25-7-65 - Credit for reinsurance - Reinsurers maintaining trust funds

Current through Vol. 41, No. 20, July 1, 2024
(a) Pursuant to Section 5122(E) of the Act,
				  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 United States financial institution as defined
				  in Section 5123.1(B) of the Act for the payment of the valid claims of its
				  United States 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 NAIC
				  annual statement form by licensed insurers, to enable the Commissioner to
				  determine the sufficiency of the trust fund.
(b) The following requirements apply to the
				  following categories of assuming insurer:
(1)
Trust fund for a single assuming insurer.
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 paragraph
				  (2) of this subsection.
(2)
Reduction in required trusteed surplus.
At any time after the
				  assuming insurer has permanently discontinued underwriting new business secured
				  by the trust for at least three (3) 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
				  thirty percent (30%) of the assuming insurer's liabilities attributable to
				  reinsurance ceded by U.S. ceding insurers covered by the trust.
(3)
Trust fund for a group including
				  incorporated and individual unincorporated underwriters.
(A) The trust fund for a group including
				  incorporated and individual unincorporated underwriters shall consist of:
(i) 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 group's several liabilities
				  attributable to business ceded by U.S. domiciled ceding insurers to any
				  underwriter of the group;
(ii) 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 this regulation, 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
(iii) 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.
(B) 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 ninety (90) days after its financial statements are due to
				  be filed with the group's domiciliary regulator, provide to the Commissioner:
(i) An annual certification by the group's
				  domiciliary regulator of the solvency of each underwriter member of the group;
				  or
(ii) If a certification is
				  unavailable, a financial statement, prepared by independent public accountants,
				  of each underwriter member of the group.
(4)
Trust fund for a group of
				  incorporated insurers under common administration.
(A) 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 National
				  Association of Insurance Commissioners) and which has continuously transacted
				  an insurance business outside the United States for at least three (3) years
				  immediately prior to making application for accreditation, shall:
(i) Consist of funds in trust in an amount
				  not less than the assuming insurers' several liabilities attributable to
				  business ceded by United States domiciled ceding insurers to any members of the
				  group pursuant to reinsurance contracts issued in the name of such
				  group;
(ii) Maintain a joint
				  trusteed surplus of which $100,000,000 shall be held jointly for the benefit of
				  United States domiciled ceding insurers of any member of the group;
				  and
(iii) File a properly executed
				  Form AR-1 as evidence of the submission to this state'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.
(B) Within ninety (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 members' domiciliary regulators and
				  financial statements, prepared by independent public accountants, of each
				  underwriter member.