Nev. Admin. Code § 681A.Sec. 20

Current through October 11, 2024

Section 681A.Sec. 20 - NEW

1. Except as otherwise provided in subsection 3 or in subsection 2 of section 18, credit for reinsurance is authorized for ceded liabilities pertaining to covered policies in a reinsurance treaty pursuant to NRS 681A.140 to 681A.240, inclusive, and NAC 681A.400 to NAC 681A.520, inclusive, if:

(a) The ceding insurer's statutory policy reserves pertaining to covered policies are established in full and in accordance with the applicable requirements of this chapter and chapter 681A of NRS and credit claimed for any reinsurance treaty does not exceed the proportionate share of such reserves ceded under the contract;

(b) The ceding insurer determines the required level of primary security with respect to each reinsurance treaty and provides support for its calculation as determined to be acceptable to the Commissioner;

(c) 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 as described in NRS 681A.240 under the reinsurance treaty on a funds withheld, trust or modified coinsurance basis;

(d) 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 pursuant to paragraph (c), are held by or on behalf of the ceding insurer as security as described in NRS 681A.240 under the reinsurance treaty; and

(e) The reinsurance treaty is approved by the Commissioner.

2. A trust used to satisfy the requirements of subsection 1 must comply with all of the requirements of NAC 681A.250 to 681A.380, inclusive, except:

(a) For the purposes identified in subsection 10 of section 19, funds consisting of primary security or other security held in trust must be valued according to the valuation rules set forth in subsection 10 of section 19, as applicable;

(b) There are no affiliate investment limitations with respect to any security held in such trust if such security is not needed to satisfy the requirements of paragraph (c) of subsection 1;

(c) 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 below 102 percent of the level required by paragraph (c) of subsection 1 at the time of the withdrawal or substitution when aggregated with primary security outside of the trust that is held by or on behalf of the ceding insurer in the manner required by paragraph (c) of subsection 1; and

(d) The determination of reserve credit pursuant to NAC 681A.330 must be determined according to the valuation rules set forth in subsection 10 of section 19.

3. The requirements of subsection 1 must be satisfied on or before the date that risks under the covered policies are ceded and on an ongoing basis thereafter. A ceding insurer may not take or consent to any action or series of actions that would result in a deficiency under paragraph (c) or (d) of subsection 1 with respect to any reinsurance treaty under which covered policies have been ceded. If a ceding insurer becomes aware that such a deficiency exists, the ceding insurer shall use its best efforts to arrange for the elimination of the deficiency as expeditiously as possible.

4. Before the due date of each quarterly or annual statement, a life insurance company that has ceded reinsurance shall perform an analysis on each reinsurance treaty under which covered policies have been ceded to determine whether, as of the valuation date, the requirements of paragraphs (c) and (d) of subsection 1 have been satisfied.

5. The ceding insurer shall establish a liability equal to the excess of the credit for reinsurance taken over the amount of primary security actually held pursuant to paragraph (c) of subsection 1, unless:

(a) The requirements of paragraphs (c) and (d) of subsection 1 were fully satisfied as of the valuation date of the reinsurance treaty, as determined pursuant to subsection 4; or

(b) Any deficiency has been eliminated before the valuation date through the addition of primary security or other security in such an amount and in such form that would have satisfied the requirements of paragraphs (c) and (d) of subsection 1 as of the valuation date.

6. Nothing in subsection 4 or 5 shall be construed to allow a ceding company to maintain any deficiency under paragraph (c) or (d) of subsection 1 for longer than is reasonably necessary to eliminate the deficiency.

Nev. Admin. Code § 681A.Sec. 20

Added to NAC by Comm'r of Insurance by R187-22A, eff. 12/14/2022

NRS 679B.130, 681A.130, 681A.145