South Dakota Administrative Rules › Title 20 - PUBLIC SAFETY › Article 20:06 - INSURANCE › Chapter 20:06:31 - Credit for reinsurance › Section 20:06:31:25 - Certified reinsurers

Current through Register Vol. 51, page 10, July 15, 2024
Pursuant to SDCL  58-14-16.1, the director shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that has been certified as a reinsurer in this state at all times for which statutory financial statement credit for reinsurance is claimed under this section. The credit allowed shall be based upon the security held by or on behalf of the ceding insurer in accordance with a rating assigned to the certified reinsurer by the director. The security shall be in a form consistent with the provisions of SDCL  58-14-16,  58-14-16.1, and §§
									20:06:31:07  to 20:06:31:16, inclusive, or §§
									20:06:31:18  to 20:06:31:23, inclusive. The amount of security required in order for full credit to be allowed shall correspond with the following requirements:
Ratings
Security Required
Secure 1
0%
Secure 2
10%
Secure 3
20%
Secure 4
50%
Secure 5
75%
Vulnerable 6
100%
Affiliated reinsurance transactions shall receive the same opportunity for reduced security requirements as all other reinsurance transactions.
The director shall require the certified reinsurer to post one hundred percent, for the benefit of the ceding insurer or its estate, security upon the entry of an order of rehabilitation, liquidation or conservation against the ceding insurer.
In order to facilitate the prompt payment of claims, a certified reinsurer may not be required to post security for catastrophe recoverables for a period of one year from the date of the first instance of a liability reserve entry by the ceding company as a result of a loss from a catastrophic occurrence as recognized by the director. The one year deferral period is contingent upon the certified reinsurer continuing to pay claims in a timely manner. Reinsurance recoverables for only the following lines of business as reported on the National Association of Insurance Commissioners annual financial statement related specifically to the catastrophic occurrence will be included in the deferral:
Line 1: Fire
Line 2: Allied Lines
Line 3: Farmowners multiple peril
Line 4: Homeowners multiple peril
Line 5: Commercial multiple peril
Line 9: Inland Marine
Line 12: Earthquake
Line 21: Auto physical damage
Credit for reinsurance under this section shall apply only to reinsurance contracts entered into or renewed on or after the effective date of the certification of the assuming insurer. Any reinsurance contract entered into prior to the effective date of the certification of the assuming insurer that is subsequently amended after the effective date of the certification of the assuming insurer, or a new reinsurance contract, covering any risk for which collateral was provided previously, shall only be subject to this section with respect to losses incurred and reserves reported from and after the effective date of the amendment or new contract.
Nothing in this section shall prohibit the parties to a reinsurance agreement from agreeing to provisions establishing security requirements that exceed the minimum security requirements established for certified reinsurers under this section.
General Authority:
SDCL  58-14-17.
Law Implemented:
SDCL  58-14-16.1,  58-14-17,  58-14-20.