Pennsylvania Code › Title 31 - INSURANCE › Part IV - Life Insurance › Chapter 90j - TERM AND UNIVERSAL LIFE INSURANCE RESERVE FINANCING STANDARDS › Section 90j.7 - Requirements applicable to covered policies to obtain credit for reinsurance; opportunity for remediation

Current through Register Vol. 54, No. 28, July 13, 2024
(a)
Requirements.
Subject to the exemptions described in §
									90j.5 (relating to exemptions) and
				the provisions of subsection (b), credit for reinsurance shall be allowed with
				respect to ceded liabilities pertaining to covered policies under section
				319.1(b) of The
				Insurance Company Law of 1921 (40 P.S. §
										442.1(b)) only if, in
				addition to all other requirements imposed by law or regulation, all of the
				following requirements are met on a treaty-by-treaty basis:
(1) The ceding insurer's statutory policy
				reserves with respect to the covered policies are established in full and in
				accordance with the applicable requirements of
				40 Pa.C.S. §§
											7101-7151 (relating to reserve liabilities)
				and its related regulations and actuarial guidelines. Credit claimed for any
				reinsurance treaty subject to this chapter may not exceed the proportionate
				share of those reserves ceded under the contract.
(2) The ceding insurer determines the
				required level of primary security with respect to each reinsurance treaty
				subject to this chapter and provides support for its calculation in a manner
				acceptable to the Commissioner.
(3)
				Funds consisting of primary security, in an amount at least equal to the
				required level of primary security, are held by or on behalf of the ceding
				insurer, as security under the reinsurance treaty within the meaning of section
				319.1 of The Insurance Company Law
				of 1921 on a funds withheld, trust or modified coinsurance basis.
(4) Funds consisting of other security, in an
				amount at least equal to any portion of the statutory reserves as to which
				primary security is not held under paragraph (3), are held by or on behalf of
				the ceding insurer as security under the reinsurance treaty within the meaning
				of section
				319.1 of The Insurance Company Law
				of 1921.
(5) A trust used to
				satisfy the requirements of this section shall comply with all of the
				conditions and qualifications of Chapter 163 (relating to requirements for
				funds held as security for the payment of obligations of unlicensed,
				unqualified reinsurers), subject to the following:
(i) Funds consisting of primary security or
				other security held in trust, shall for the purposes identified in §
											90j.6(b)
				(relating to actuarial method), be valued according to the valuation rules set
				forth in § 90j.6(b), as applicable.
(ii) There may not be any affiliate
				investment limitations with respect to any security held in trust if the
				security is not needed to satisfy the requirements of paragraph (3).
(iii) The reinsurance treaty must prohibit
				withdrawals or substitutions of trust assets that would leave the fair market
				value of the primary security within the trust, when aggregated with primary
				security outside the trust that is held by or on behalf of the ceding insurer
				in the manner required by paragraph (3), below 102% of the level required by
				paragraph (3) at the time of the withdrawal or substitution.
(iv) The determination of reserve credit
				under Chapter 163 shall be determined according to the valuation rules set
				forth in § 90j.6(b), as applicable.
(6) The reinsurance treaty has been approved
				by the Commissioner.