97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
SB2864

 

Introduced 1/24/2012, by Sen. Antonio Muņoz

 

SYNOPSIS AS INTRODUCED:
 
215 ILCS 5/173.1  from Ch. 73, par. 785.1

    Amends the Illinois Insurance Code in the provision concerning credit that is allowed a domestic ceding insurer. Includes additional provisions under which credit shall be allowed when the reinsurance is ceded to an assuming insurer domiciled in certain categories of states. Includes additional requirements to apply to certain categories of assuming insurers. Makes changes to the provision concerning the inception, amendment, and renewal dates of reinsurance agreements. Includes additional provisions under which credit shall be allowed when the reinsurance is ceded to an assuming insurer certified in the State. Sets forth provisions concerning the suspension and revocation of a reinsurer's accreditation or certification, the concentration of risk, and applicability to reinsurance agreements. Makes other changes.


LRB097 18029 RPM 63252 b

 

 

A BILL FOR

 

SB2864LRB097 18029 RPM 63252 b

1    AN ACT concerning insurance.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Insurance Code is amended by
5changing Section 173.1 as follows:
 
6    (215 ILCS 5/173.1)  (from Ch. 73, par. 785.1)
7    Sec. 173.1. Credit allowed a domestic ceding insurer.
8    (1) Except as otherwise provided under Article VIII 1/2 of
9this Code and related provisions of the Illinois Administrative
10Code, credit for reinsurance shall be allowed a domestic ceding
11insurer as either an admitted asset or a deduction from
12liability on account of reinsurance ceded only when the
13reinsurer meets the requirements of subdivision subsection
14(1)(A) or (B) or (B-5) or (C) or (C-5) or (D). Credit shall be
15allowed under subdivision subsection (1)(A) or (B) or (B-5)
16only as respects cessions of those kinds or classes of business
17in which the assuming insurer is licensed or otherwise
18permitted to write or assume in its state of domicile, or in
19the case of a U.S. branch of an alien assuming insurer, in the
20state through which it is entered and licensed to transact
21insurance or reinsurance. Credit shall be allowed under
22subdivision subsection (1)(B-5) or (C) of this Section only if
23the applicable requirements of subdivision subsection (1)(E)

 

 

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1have been satisfied.
2        (A) Credit shall be allowed when the reinsurance is
3    ceded to an assuming insurer that is authorized in this
4    State to transact the types of insurance ceded and has at
5    least $5,000,000 in capital and surplus.
6        (B) Credit shall be allowed when the reinsurance is
7    ceded to an assuming insurer that is accredited as a
8    reinsurer in this State. An accredited reinsurer is one
9    that:
10            (1) files with the Director evidence of its
11        submission to this State's jurisdiction;
12            (2) submits to this State's authority to examine
13        its books and records;
14            (3) is licensed to transact insurance or
15        reinsurance in at least one state, or in the case of a
16        U.S. branch of an alien assuming insurer is entered
17        through and licensed to transact insurance or
18        reinsurance in at least one state;
19            (4) files annually with the Director a copy of its
20        annual statement filed with the insurance department
21        of its state of domicile and a copy of its most recent
22        audited financial statement; and
23            (5) maintains a surplus as regards policyholders
24        in an amount that is not less than $20,000,000 and
25        whose accreditation has been approved by the Director.
26        No credit shall be allowed a domestic ceding insurer,

 

 

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1        if the assuming insurers' accreditation has been
2        revoked by the Director after notice and hearing.
3        (B-5)(1) Credit shall be allowed when the reinsurance
4        is ceded to an assuming insurer that is domiciled in,
5        or in the case of a U.S. branch of an alien assuming
6        insurer is entered through, a state that employs
7        standards regarding credit for reinsurance
8        substantially similar to those applicable under this
9        Code and the assuming insurer or U.S. branch of an
10        alien assuming insurer (a) maintains a surplus as
11        regards policyholders in an amount not less than
12        $20,000,000 and (b) submits to the authority of this
13        State to examine its books and records.
14            (2) The requirement of subdivision (1)(B-5)(1)(a)
15        of this Section does not apply to reinsurance ceded and
16        assumed pursuant to pooling arrangements among
17        insurers in the same holding company system.
18        (C)(1) Credit shall be allowed when the reinsurance is
19        ceded to an assuming insurer that maintains a trust
20        fund in a qualified United States financial
21        institution, as defined in subsection 3(B), for the
22        payment of the valid claims of its United States
23        policyholders and ceding insurers, their assigns and
24        successors in interest. The assuming insurer shall
25        report to the Director information substantially the
26        same as that required to be reported on the NAIC annual

 

 

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1        and quarterly financial statement by authorized
2        insurers and any other financial information that the
3        Director deems necessary to determine the financial
4        condition of the assuming insurer and the sufficiency
5        of the trust fund. The assuming insurer shall submit to
6        examination of its books and records by the Director
7        and bear the expense of examination.
8            (2)(a) Credit for reinsurance shall not be granted
9        under this subsection unless the form of the trust and
10        any amendments to the trust have been approved by:
11                (i) the regulatory official of the state where
12            the trust is domiciled; or
13                (ii) the regulatory official of another state
14            who, pursuant to the terms of the trust instrument,
15            has accepted principal regulatory oversight of the
16            trust.
17            (b) The form of the trust and any trust amendments
18        also shall be filed with the regulatory official of
19        every state in which the ceding insurer beneficiaries
20        of the trust are domiciled. The trust instrument shall
21        provide that contested claims shall be valid and
22        enforceable upon the final order of any court of
23        competent jurisdiction in the United States. The trust
24        shall vest legal title to its assets in its trustees
25        for the benefit of the assuming insurer's United States
26        policyholders and ceding insurees and their assigns

 

 

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1        and successors in interest. The trust and the assuming
2        insurer shall be subject to examination as determined
3        by the Director.
4            (c) The trust shall remain in effect for as long as
5        the assuming insurer has outstanding obligations due
6        under the reinsurance agreements subject to the trust.
7        No later than February 28 of each year the trustee of
8        the trust shall report to the Director in writing the
9        balance of the trust and a list of the trust's
10        investments at the preceding year-end and shall
11        certify the date of termination of the trust, if so
12        planned, or certify that the trust will not expire
13        prior to the next following December 31.
14            (3) The following requirements apply to the
15        following categories of assuming insurer:
16                (a) The trust fund for a single assuming
17            insurer shall consist of funds in trust in an
18            amount not less than the assuming insurer's
19            liabilities attributable to reinsurance ceded by
20            U.S. ceding insurers, and in addition, the
21            assuming insurer shall maintain a trusteed surplus
22            of not less than $20,000,000, except as provided in
23            subdivision (3)(a-5) of this paragraph (D).
24                (a-5) At any time after the assuming insurer
25            has permanently discontinued underwriting new
26            business secured by the trust for at least 3 full

 

 

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1            years, the Director with principal regulatory
2            oversight of the trust may authorize a reduction in
3            the required trusteed surplus, but only after a
4            finding, based on an assessment of the risk, that
5            the new required surplus level is adequate for the
6            protection of U.S. ceding insurers, policyholders,
7            and claimants in light of reasonably foreseeable
8            adverse loss development. The risk assessment may
9            involve an actuarial review, including an
10            independent analysis of reserves and cash flows,
11            and shall consider all material risk factors,
12            including, when applicable, the lines of business
13            involved, the stability of the incurred loss
14            estimates, and the effect of the surplus
15            requirements on the assuming insurer's liquidity
16            or solvency. The minimum required trusteed surplus
17            may not be reduced to an amount less than 30% of
18            the assuming insurer's liabilities attributable to
19            reinsurance ceded by U.S. ceding insurers covered
20            by the trust.
21                (b)(i) In the case of a group including
22            incorporated and individual unincorporated
23            underwriters:
24                    (I) for reinsurance ceded under
25                reinsurance agreements with an inception,
26                amendment, or renewal date on or after January

 

 

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1                1, 1993 August 1, 1995, the trust shall consist
2                of a trusteed account in an amount not less
3                than the respective underwriters' group's
4                several liabilities attributable to business
5                ceded by U.S. domiciled ceding insurers to any
6                member of the group;
7                    (II) for reinsurance ceded under
8                reinsurance agreements with an inception date
9                on or before December 31, 1992 July 31, 1995
10                and not amended or renewed after that date,
11                notwithstanding the other provisions of this
12                Act, the trust shall consist of a trusteed
13                account in an amount not less than the group's
14                several insurance and reinsurance liabilities
15                attributable to business written in the United
16                States; and
17                    (III) in addition to these trusts, the
18                group shall maintain in trust a trusteed
19                surplus of which not less than $100,000,000
20                shall be held jointly for the benefit of the
21                U.S. domiciled ceding insurers of any member of
22                the group for all years of account.
23                (ii) The incorporated members of the group
24            shall not be engaged in any business other than
25            underwriting as a member of the group and shall be
26            subject to the same level of solvency regulation

 

 

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1            and control by the group's domiciliary regulator
2            as are the unincorporated members.
3                (iii) Within 90 days after its financial
4            statements are due to be filed with the group's
5            domiciliary regulator, the group shall provide to
6            the Director an annual certification by the
7            group's domiciliary regulator of the solvency of
8            each underwriter member, or if a certification is
9            unavailable, financial statements prepared by
10            independent public accountants of each underwriter
11            member of the group.
12                (c) In the case of a group of incorporated
13            insurers under common administration, the group
14            shall:
15                    (i) have continuously transacted an
16                insurance business outside the United States
17                for at least 3 years immediately before making
18                application for accreditation;
19                    (ii) maintain aggregate policyholders'
20                surplus of not less than $10,000,000,000;
21                    (iii) maintain a trust in an amount not
22                less than the group's several liabilities
23                attributable to business ceded by United
24                States domiciled ceding insurers to any member
25                of the group pursuant to reinsurance contracts
26                issued in the name of the group;

 

 

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1                    (iv) in addition, maintain a joint
2                trusteed surplus of which not less than
3                $100,000,000 shall be held jointly for the
4                benefit of the United States ceding insurers of
5                any member of the group as additional security
6                for these liabilities; and
7                    (v) within 90 days after its financial
8                statements are due to be filed with the group's
9                domiciliary regulator, make available to the
10                Director an annual certification of each
11                underwriter member's solvency by the member's
12                domiciliary regulator and financial statements
13                of each underwriter member of the group
14                prepared by its independent public accountant.
15        (C-5) Credit shall be allowed when the reinsurance is
16    ceded to an assuming insurer that has been certified by the
17    Director as a reinsurer in this State and secures its
18    obligations in accordance with the requirements of this
19    subsection.
20            (1) In order to be eligible for certification, the
21        assuming insurer shall meet the following
22        requirements:
23                (a) the assuming insurer must be domiciled and
24            licensed to transact insurance or reinsurance in a
25            qualified jurisdiction, as determined by the
26            Director pursuant to subparagraph (3) of this

 

 

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1            paragraph;
2                (b) the assuming insurer must maintain minimum
3            capital and surplus, or its equivalent, in an
4            amount to be determined by the Director pursuant to
5            regulation;
6                (c) the assuming insurer must maintain
7            financial strength ratings from 2 or more rating
8            agencies deemed acceptable by the Director
9            pursuant to regulation;
10                (d) the assuming insurer must agree to submit
11            to the jurisdiction of this State, appoint the
12            Director as its agent for service of process in
13            this State, and agree to provide security for 100%
14            of the assuming insurer's liabilities attributable
15            to reinsurance ceded by U.S. ceding insurers if it
16            resists enforcement of a final U.S. judgment;
17                (e) the assuming insurer must agree to meet
18            applicable information filing requirements as
19            determined by the Director, both with respect to an
20            initial application for certification and on an
21            ongoing basis; and
22                (f) the assuming insurer must satisfy any
23            other requirements for certification deemed
24            relevant by the Director.
25            (2) An association, including incorporated and
26        individual unincorporated underwriters, may be a

 

 

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1        certified reinsurer. In order to be eligible for
2        certification, in addition to satisfying the
3        requirements of subparagraph (1) of this paragraph
4        (C-5):
5                (a) the association shall satisfy its minimum
6            capital and surplus requirements through the
7            capital and surplus equivalents (net of
8            liabilities) of the association and its members,
9            which shall include a joint central fund that may
10            be applied to any unsatisfied obligation of the
11            association or any of its members, in an amount
12            determined by the Director to provide adequate
13            protection;
14                (b) the incorporated members of the
15            association shall not be engaged in any business
16            other than underwriting as a member of the
17            association and shall be subject to the same level
18            of regulation and solvency control by the
19            association's domiciliary regulator as are the
20            unincorporated members; and
21                (c) within 90 days after its financial
22            statements are due to be filed with the
23            association's domiciliary regulator, the
24            association shall provide to the Director an
25            annual certification by the association's
26            domiciliary regulator of the solvency of each

 

 

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1            underwriter member; or if a certification is
2            unavailable, financial statements, prepared by
3            independent public accountants, of each
4            underwriter member of the association.
5            (3) The Director shall create and publish a list of
6        qualified jurisdictions, under which an assuming
7        insurer licensed and domiciled in such jurisdiction is
8        eligible to be considered for certification by the
9        Director as a certified reinsurer.
10                (a) In order to determine whether the
11            domiciliary jurisdiction of a non-U.S. assuming
12            insurer is eligible to be recognized as a qualified
13            jurisdiction, the Director shall evaluate the
14            appropriateness and effectiveness of the
15            reinsurance supervisory system of the
16            jurisdiction, both initially and on an ongoing
17            basis, and consider the rights, benefits, and
18            extent of reciprocal recognition afforded by the
19            non-U.S. jurisdiction to reinsurers licensed and
20            domiciled in the U.S. A qualified jurisdiction
21            must agree to share information and cooperate with
22            the Director with respect to all certified
23            reinsurers domiciled within that jurisdiction. A
24            jurisdiction may not be recognized as a qualified
25            jurisdiction if the Director has determined that
26            the jurisdiction does not adequately and promptly

 

 

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1            enforce final U.S. judgments and arbitration
2            awards. Additional factors may be considered in
3            the discretion of the Director.
4                (b) A list of qualified jurisdictions shall be
5            published through the NAIC Committee Process. The
6            Director shall consider this list in determining
7            qualified jurisdictions. If the Director approves
8            a jurisdiction as qualified that does not appear on
9            the list of qualified jurisdictions, then the
10            Director shall provide thoroughly documented
11            justification in accordance with criteria to be
12            developed under regulations.
13                (c) U.S. jurisdictions that meet the
14            requirement for accreditation under the NAIC
15            financial standards and accreditation program
16            shall be recognized as qualified jurisdictions.
17                (d) If a certified reinsurer's domiciliary
18            jurisdiction ceases to be a qualified
19            jurisdiction, then the Director has the discretion
20            to suspend the reinsurer's certification
21            indefinitely, in lieu of revocation.
22            (4) The Director shall assign a rating to each
23        certified reinsurer, giving due consideration to the
24        financial strength ratings that have been assigned by
25        rating agencies deemed acceptable to the Director
26        pursuant to regulation. The Director shall publish a

 

 

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1        list of all certified reinsurers and their ratings.
2            (5) A certified reinsurer shall secure obligations
3        assumed from U.S. ceding insurers under this
4        subsection at a level consistent with its rating, as
5        specified in rules adopted by the Director.
6                (a) In order for a domestic ceding insurer to
7            qualify for full financial statement credit for
8            reinsurance ceded to a certified reinsurer, the
9            certified reinsurer shall maintain security in a
10            form acceptable to the Director and consistent
11            with the provisions of subparagraph (3) of this
12            paragraph (C-5), or in a multibeneficiary trust in
13            accordance with paragraph (C) of this subsection
14            (l), except as otherwise provided in this
15            subparagraph (5).
16                (b) If a certified reinsurer maintains a trust
17            to fully secure its obligations subject to
18            paragraph (C) of this subsection (1), and chooses
19            to secure its obligations incurred as a certified
20            reinsurer in the form of a multibeneficiary trust,
21            then the certified reinsurer shall maintain
22            separate trust accounts for its obligations
23            incurred under reinsurance agreements issued or
24            renewed as a certified reinsurer with reduced
25            security as permitted by this subsection or
26            comparable laws of other U.S. jurisdictions and

 

 

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1            for its obligations subject to paragraph (C) of
2            this subsection (l). It shall be a condition to the
3            grant of certification under paragraph (C-5) of
4            this subsection (l) that the certified reinsurer
5            shall have bound itself, by the language of the
6            trust and agreement with the Director with
7            principal regulatory oversight of each such trust
8            account, to fund, upon termination of any such
9            trust account, out of the remaining surplus of such
10            trust any deficiency of any other such trust
11            account.
12                (c) The minimum trusteed surplus requirements
13            provided in paragraph (C) are not applicable with
14            respect to a multibeneficiary trust maintained by
15            a certified reinsurer for the purpose of securing
16            obligations incurred under this subsection, except
17            that such trust shall maintain a minimum trusteed
18            surplus of $10,000,000.
19                (d) With respect to obligations incurred by a
20            certified reinsurer under this subsection, if the
21            security is insufficient, then the Director shall
22            reduce the allowable credit by an amount
23            proportionate to the deficiency, and has the
24            discretion to impose further reductions in
25            allowable credit upon finding that there is a
26            material risk that the certified reinsurer's

 

 

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1            obligations will not be paid in full when due.
2                (e) For purposes of this subsection, a
3            certified reinsurer whose certification has been
4            terminated for any reason shall be treated as a
5            certified reinsurer required to secure 100% of its
6            obligations.
7                    (i) As used in this subsection, the term
8                "terminated" refers to revocation, suspension,
9                voluntary surrender and inactive status.
10                    (ii) If the Director continues to assign a
11                higher rating as permitted by other provisions
12                of this Section, then this requirement does not
13                apply to a certified reinsurer in inactive
14                status or to a reinsurer whose certification
15                has been suspended.
16            (6) If an applicant for certification has been
17        certified as a reinsurer in an NAIC accredited
18        jurisdiction, then the Director has the discretion to
19        defer to that jurisdiction's certification, and has
20        the discretion to defer to the rating assigned by that
21        jurisdiction, and such assuming insurer shall be
22        considered to be a certified reinsurer in this State.
23            (7) A certified reinsurer that ceases to assume new
24        business in this State may request to maintain its
25        certification in inactive status in order to continue
26        to qualify for a reduction in security for its in-force

 

 

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1        business. An inactive certified reinsurer shall
2        continue to comply with all applicable requirements of
3        this subsection, and the Director shall assign a rating
4        that takes into account, if relevant, the reasons why
5        the reinsurer is not assuming new business.
6        (D) Credit shall be allowed when the reinsurance is
7    ceded to an assuming insurer not meeting the requirements
8    of subsection (1) (A), (B), or (C) but only with respect to
9    the insurance of risks located in jurisdictions where that
10    reinsurance is required by applicable law or regulation of
11    that jurisdiction.
12        (E) If the assuming insurer is not licensed to transact
13    insurance in this State or an accredited reinsurer in this
14    State, the credit permitted by subdivision subsection
15    (1)(B-5) and (C) shall not be allowed unless the assuming
16    insurer agrees in the reinsurance agreements:
17            (1) that in the event of the failure of the
18        assuming insurer to perform its obligations under the
19        terms of the reinsurance agreement, the assuming
20        insurer, at the request of the ceding insurer, shall
21        submit to the jurisdiction of any court of competent
22        jurisdiction in any state of the United States, will
23        comply with all requirements necessary to give the
24        court jurisdiction, and will abide by the final
25        decision of the court or of any appellate court in the
26        event of an appeal; and

 

 

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1            (2) to designate the Director or a designated
2        attorney as its true and lawful attorney upon whom may
3        be served any lawful process in any action, suit, or
4        proceeding instituted by or on behalf of the ceding
5        company.
6        This provision is not intended to conflict with or
7    override the obligation of the parties to a reinsurance
8    agreement to arbitrate their disputes, if an obligation to
9    arbitrate is created in the agreement.
10        (F) If the assuming insurer does not meet the
11    requirements of subsection (1)(A) or (B), the credit
12    permitted by subsection (1)(C) shall not be allowed unless
13    the assuming insurer agrees in the trust agreements to the
14    following conditions:
15            (1) Notwithstanding any other provisions in the
16        trust instrument, if the trust fund is inadequate
17        because it contains an amount less than the amount
18        required by subsection (C)(3) of this Section or if the
19        grantor of the trust has been declared insolvent or
20        placed into receivership, rehabilitation, liquidation,
21        or similar proceedings under the laws of its state or
22        country of domicile, the trustee shall comply with an
23        order of the state official with regulatory oversight
24        over the trust or with an order of a court of competent
25        jurisdiction directing the trustee to transfer to the
26        state official with regulatory oversight all of the

 

 

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1        assets of the trust fund.
2            (2) The assets shall be distributed by and claims
3        shall be filed with and valued by the state official
4        with regulatory oversight in accordance with the laws
5        of the state in which the trust is domiciled that are
6        applicable to the liquidation of domestic insurance
7        companies.
8            (3) If the state official with regulatory
9        oversight determines that the assets of the trust fund
10        or any part thereof are not necessary to satisfy the
11        claims of the U.S. ceding insurers of the grantor of
12        the trust, the assets or part thereof shall be returned
13        by the state official with regulatory oversight to the
14        trustee for distribution in accordance with the trust
15        agreement.
16            (4) The grantor shall waive any rights otherwise
17        available to it under U.S. law that are inconsistent
18        with the provision.
19        (G) If an accredited or certified reinsurer ceases to
20    meet the requirements for accreditation or certification,
21    then the Director may suspend or revoke the reinsurer's
22    accreditation or certification.
23            (1) The Director must give the reinsurer notice and
24        opportunity for hearing. The suspension or revocation
25        may not take effect until after the Director's order on
26        hearing, unless:

 

 

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1                (a) the reinsurer waives its right to hearing;
2                (b) the Director's order is based on
3            regulatory action by the reinsurer's domiciliary
4            jurisdiction or the voluntary surrender or
5            termination of the reinsurer's eligibility to
6            transact insurance or reinsurance business in its
7            domiciliary jurisdiction or in the primary
8            certifying state of the reinsurer under
9            subdivision (C-5)(6) of this subsection; or
10                (c) the Director finds that an emergency
11            requires immediate action and a court of competent
12            jurisdiction has not stayed the Director's action.
13            (2) While a reinsurer's accreditation or
14        certification is suspended, no reinsurance contract
15        issued or renewed after the effective date of the
16        suspension qualifies for credit except to the extent
17        that the reinsurer's obligations under the contract
18        are secured in accordance with Section 32 of this Code.
19        If a reinsurer's accreditation or certification is
20        revoked, no credit for reinsurance may be granted after
21        the effective date of the revocation except to the
22        extent that the reinsurer's obligations under the
23        contract are secured in accordance with subdivision
24        (C-5)(5) of this subsection or Section 32 of this Code.
25        (H) The following provisions shall apply concerning
26    concentration of risk:

 

 

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1            (1) A ceding insurer shall take steps to manage its
2        reinsurance recoverable proportionate to its own book
3        of business. A domestic ceding insurer shall notify the
4        Director within 30 days after reinsurance recoverables
5        from any single assuming insurer, or group of
6        affiliated assuming insurers, exceeds 50% of the
7        domestic ceding insurer's last reported surplus to
8        policyholders, or after it is determined that
9        reinsurance recoverables from any single assuming
10        insurer, or group of affiliated assuming insurers, is
11        likely to exceed this limit. The notification shall
12        demonstrate that the exposure is safely managed by the
13        domestic ceding insurer.
14            (2) A ceding insurer shall take steps to diversify
15        its reinsurance program. A domestic ceding insurer
16        shall notify the Director within 30 days after ceding
17        to any single assuming insurer, or group of affiliated
18        assuming insurers, more than 20% of the ceding
19        insurer's gross written premium in the prior calendar
20        year, or after it has determined that the reinsurance
21        ceded to any single assuming insurer, or group of
22        affiliated assuming insurers, is likely to exceed this
23        limit. The notification shall demonstrate that the
24        exposure is safely managed by the domestic ceding
25        insurer.
26    (2) Credit for the reinsurance ceded by a domestic insurer

 

 

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1to an assuming insurer not meeting the requirements of
2subsection (1) shall be allowed in an amount not exceeding the
3assets or liabilities carried by the ceding insurer. The credit
4shall not exceed the amount of funds held by or held in trust
5for the ceding insurer under a reinsurance contract with the
6assuming insurer as security for the payment of obligations
7thereunder, if the security is held in the United States
8subject to withdrawal solely by, and under the exclusive
9control of, the ceding insurer; or, in the case of a trust,
10held in a qualified United States financial institution, as
11defined in subsection (3)(B). This security may be in the form
12of:
13        (A) Cash.
14        (B) Securities listed by the Securities Valuation
15    Office of the National Association of Insurance, including
16    those deemed exempt from filing as defined by the Purposes
17    and Procedures Manual of the Securities Valuation Office
18    Commissioners that conform to the requirements of Article
19    VIII of this Code that are not issued by an affiliate of
20    either the assuming or ceding company.
21        (C) Clean, irrevocable, unconditional, letters of
22    credit issued or confirmed by a qualified United States
23    financial institution, as defined in subsection (3)(A).
24    The letters of credit shall be effective no later than
25    December 31 of the year for which filing is being made, and
26    in the possession of, or in trust for, the ceding company

 

 

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1    on or before the filing date of its annual statement.
2    Letters of credit meeting applicable standards of issuer
3    acceptability as of the dates of their issuance (or
4    confirmation) shall, notwithstanding the issuing (or
5    confirming) institution's subsequent failure to meet
6    applicable standards of issuer acceptability, continue to
7    be acceptable as security until their expiration,
8    extension, renewal, modification, or amendment, whichever
9    first occurs.
10        (D) Any other form of security acceptable to the
11    Director.
12    (3)(A) For purposes of subsection 2(C), a "qualified United
13    States financial institution" means an institution that:
14            (1) is organized or, in the case of a U.S. office
15        of a foreign banking organization, licensed under the
16        laws of the United States or any state thereof;
17            (2) is regulated, supervised, and examined by U.S.
18        federal or state authorities having regulatory
19        authority over banks and trust companies;
20            (3) has been designated by either the Director or
21        the Securities Valuation Office of the National
22        Association of Insurance Commissioners as meeting such
23        standards of financial condition and standing as are
24        considered necessary and appropriate to regulate the
25        quality of financial institutions whose letters of
26        credit will be acceptable to the Director; and

 

 

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1            (4) is not affiliated with the assuming company.
2        (B) A "qualified United States financial institution"
3    means, for purposes of those provisions of this law
4    specifying those institutions that are eligible to act as a
5    fiduciary of a trust, an institution that:
6            (1) is organized or, in the case of the U.S. branch
7        or agency office of a foreign banking organization,
8        licensed under the laws of the United States or any
9        state thereof and has been granted authority to operate
10        with fiduciary powers;
11            (2) is regulated, supervised, and examined by
12        federal or state authorities having regulatory
13        authority over banks and trust companies; and
14            (3) is not affiliated with the assuming company,
15        however, if the subject of the reinsurance contract is
16        insurance written pursuant to Section 155.51 of this
17        Code, the financial institution may be affiliated with
18        the assuming company with the prior approval of the
19        Director.
20        (C) The Director may adopt rules implementing the
21    provisions of this law.
22        (D) This amendatory Act of the 97th General Assembly
23    shall apply to all cessions after the effective date of
24    this amendatory Act of the 97th General Assembly under
25    reinsurance agreements that have an inception,
26    anniversary, or renewal date not less than 6 months after

 

 

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1    the effective date of this amendatory Act of the 97th
2    General Assembly.
3(Source: P.A. 90-381, eff. 8-14-97.)