Opinion ID: 865021
Heading Depth: 2
Heading Rank: 2

Heading: whether the a ssu m pt io n reinsurance

Text: AGREEMENTS BETWEEN MS CASUALTY AND AMERICAN R E L IA B L E A N D L E G IO N C O N S T IT U T E D IR E C T INSURANCE. ¶21. We next address whether the assumption reinsurance agreements constitute direct insurance. According to Miss. Code Ann. Section 83-23-105, MIGA is only responsible for claims stemming from direct insurance and not reinsurance. ¶22. The contracts between Legion and MS Casualty and American Reliable were titled “assumption reinsurance agreements.” However, this phrase is misleading. There is no precedent from this Court that defines direct insurance. However, the United States Supreme Court has stated that: Reinsurance comes in two basic types, assumption reinsurance and indemnity reinsurance. In the case of assumption reinsurance, the reinsurer steps into the shoes of the ceding company with respect to the reinsured policy, assuming all its liabilities and its responsibility to maintain required reserves against potential claims. The assumption reinsurer thereafter receives all premiums directly and becomes directly liable to the holders of the policies it has reinsured. In indemnity reinsurance, which is at issue in this case, it is the ceding company that remains directly liable to its policy-holders, and that continues to pay claims and collect premiums. The indemnity reinsurer assumes no direct liability to the policyholders. Instead, it agrees to indemnify, or reimburse, the ceding company for a specified percentage of the claims and expenses attributable to the risks that have been reinsured, and the ceding company turns over to it a like percentage of the premiums generated by the insurance of those risks. 11 Colonial Am. Life Ins. Co. v. Commissioner, 491 U.S. 244, 247, 109 S.Ct. 2408, 2411, 105 L.Ed.2d 199, 207 (1989). ¶23. The agreements are clearly direct insurance. Legion stepped into the shoes of MS Casualty and American Reliable. None of the terms and conditions of the contracts changed; but instead, the names of the parties were simply substituted. The reserves were transferred to Legion, and the policyholders began paying premiums to Legion. The risk was entirely upon Legion; therefore Legion was directly liable. Thus, we find that the agreements constituted direct insurance rather than reinsurance.