Md. Code Regs. 31.13.02.03

Current through Register Vol. 51, No. 24, December 2, 2024

Section 31.13.02.03 - Deposit

A. Securities on Deposit with the Commissioner.

(1) In order to qualify as an insurer in accordance with Insurance Article, § 13-116, Annotated Code of Maryland, the insurer at all times shall keep on deposit with the Commissioner acceptable securities with a total value at least equal to the sum of §A(1)(a) and (b) of this regulation:

(a) $500,000 reduced by the amount of the insurer's actual capital; and

(b) $750,000 at the time of initial qualification and, after that, $500,000, in either case reduced by the amount of the insurer's actual surplus.

(2) If the insurer's actual capital exceeds $500,000, the excess may be used by the insurer to reduce the amount required by §A(1)(b) of this regulation.

(3) If the insurer's actual surplus exceeds the amount required under §A(1)(b) of this regulation, the excess may not be used to reduce the amount required by §A(1)(a), of this regulation, except as provided in §A(4) of this regulation.

(4) If, after deducting investments which qualify under Insurance Article, § 5-510(a) and (b), Annotated Code of Maryland, in the amount of the insurer's actual capital, the insurer's remaining investments which qualify under Insurance Article, § 5-511, Annotated Code of Maryland, exceed the amount of the insurer's liabilities as defined in Insurance Article, § 5-103, that part of the excess assets which also qualifies under Insurance Article, § 5-510(a) and (b), Annotated Code of Maryland, may be used, at the insurer's option, as a credit against either §A(1)(a) or A(1)(b) of this regulation, but not both.

B. In determining the amount of the insurer's actual capital, only the type of investments listed in Insurance Article, § 5-510(a) and (b), Annotated Code of Maryland, shall be considered.

C. The requirements of Insurance Article, Title 5, Subtitle 5, shall be used to determine the amount of the insurer's actual surplus.

D. In determining the value of the deposit, securities shall be valued at market but not in excess of par value.

E. In order to ascertain that the value of the securities on deposit is sufficient to meet the requirements of Insurance Article, § 13-116, Annotated Code of Maryland, and of this regulation, the insurer shall:

(1) File with the Commissioner not later than March 1 in each calendar year a certified copy of its NAIC Convention Blank form of Annual Statement as of the preceding December 31; and

(2) Require the custodian to supply the Commissioner not later than January 31 in each calendar year with a proper accounting of the securities on deposit as of the preceding December 31. This accounting shall include a listing of the securities on deposit showing the par value and the market value of each, together with a statement as to whether any are in default.

F. If an insurer which has previously qualified under Insurance Article, § 13-116, Annotated Code of Maryland, no longer meets the requirements of that section, the Commissioner shall notify the insurer in writing of the additional amount of deposit required to restore the insurer's qualification. If the insurer does not satisfy the requirements by making the additional deposit within 30 days after the date of the Commissioner's notice, the insurer shall forthwith cease to accept any reinsurance under any fronting agreement to which Insurance Article, § 13-116, Annotated Code of Maryland, applies.

G. Unless the Commissioner liquidates a deposit for the purpose of paying claims to Maryland policyholders, certificate holders, authorized insurers, or creditors and for providing for the expenses incurred in connection with the payment of these claims, a deposit made by an insurer for the purpose of qualifying under Insurance Article, § 13-116, Annotated Code of Maryland, shall remain on deposit with the Commissioner until:

(1) The insurer notifies the Commissioner that it no longer wishes to qualify; and

(2) All policies issued in Maryland and reinsured by the insurer are terminated.

H. If the insurer is adjudged insolvent, or, if for any reason the Commissioner, after a hearing, determines that the rights of authorized insurers, policyholders, certificate holders, or creditors may be in jeopardy, the Commissioner may direct the custodian to immediately deliver to him the securities then held on deposit, or at the Commissioner's option, he may direct the custodian to sell the securities and remit the proceeds of the sale to the Commissioner.

I. An authorized insurer desiring to make a fronting agreement shall first ascertain that the reinsurer is appropriately licensed in Maryland, or is an accredited reinsurer, or is qualified as a fronting reinsurer under Insurance Article, § 13-116, Annotated Code of Maryland. An authorized insurer shall be subject to the penalties provided in Insurance Article, § 4-113, Annotated Code of Maryland, as well as any other applicable penalties if:

(1) The authorized insurer makes a fronting agreement with a reinsurer which is not licensed, or is not an accredited reinsurer, or has not qualified in accordance with Insurance Article, § 13-116, Annotated Code of Maryland; or

(2) The authorized insurer continues in a fronting agreement after having been notified by the Commissioner that the reinsurer has ceased to be qualified as a fronting reinsurer.

J. The deposit required by these regulations may be made either by the insurer, or by another person on behalf of the insurer. If the deposit is made by another person, the custodian agreement shall provide the Commissioner all the rights of access to the deposit which these regulations require. If any agreement with reference to the deposit is made between the insurer and the person making the deposit, the insurer shall submit the agreement to the Commissioner for his approval at the time the insurer requests the Commissioner to accept the custodian agreement under which the deposit is kept.

Md. Code Regs. 31.13.02.03

Regulation .03A amended effective October 29, 1990 (17:21 Md. R. 2527)
Regulation .03E amended effective October 29, 1990 (17:21 Md. R. 2527); amended effective 43:22 Md. R. 1223, eff. 11/7/2016