Current through Register Vol. 54, No. 45, November 9, 2024
Section 161.3 - Credit for reinsuranceA licensed domestic ceding insurer will be allowed credit for reinsurance as either an asset or a deduction from liability on account of reinsurance ceded only when the reinsurer meets the requirements of this section or as otherwise provided in § 161.7 (relating to credit for joint underwriting or pooling arrangements).
(1) Credit will be allowed when the reinsurance is ceded to an assuming insurer which is licensed to transact insurance or reinsurance in this Commonwealth.(2) Credit will be allowed when the reinsurance is ceded to an assuming foreign insurer which has met the conditions specified in this paragraph and has been deemed to be a qualified reinsurer by the Commissioner. To be considered for qualification, an assuming foreign insurer shall meet the following conditions. The insurer shall: (i) File evidence of its submission to the Commonwealth's jurisdiction with the Commissioner.(ii) Submit to the Commonwealth's authority to examine its books and records.(iii) Be licensed to transact insurance or reinsurance in at least one state, or in the case of a United States branch of an alien assuming insurer be entered through and licensed to transact insurance or reinsurance in at least one state. After 1994, one of the states in which the insurer is licensed shall be an accredited state.(iv) File with the application for qualification and annually thereafter a copy of its annual statement filed with the insurance department of its state of domicile and a copy of its most recent audited financial statement.(v) Demonstrate to the satisfaction of the Commissioner that it has adequate financial capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from domestic insurers. An assuming insurer is deemed to meet this requirement as of the time of its application if it maintains a surplus as regards policyholders in an amount not less than $20 million and its qualification has not been denied by the Commissioner within 90 days after submission of its application.(3) Credit will be allowed when the reinsurance is ceded to an assuming alien insurer which has met the conditions specified in this paragraph and has been deemed to be a qualified reinsurer by the Commissioner. To be considered for qualification, an assuming alien insurer shall meet the following conditions. The insurer shall: (i) File with the Commissioner evidence of its submission to the Commonwealth's jurisdiction.(ii) Submit to the Commonwealth's authority to examine its books and records.(iii) File with the application for qualification and annually thereafter substantially the same information as that required to be reported on the NAIC annual statement blank by licensed insurers.(iv) File with the application for qualification and annually thereafter details on the soundness of its ceded reinsurance program, including the identity, domicile and premium volume for each retrocessionaire when the amount of reinsurance premium ceded is greater than or equal to $50,000. If the insurer demonstrates to the Commissioner's satisfaction its inability to provide the requested detail with respect to individual retrocessionaires because of its method of operation, the Commissioner will consider the acceptability of alternative information pertaining to the soundness of the insurer's ceded reinsurance program.(v) Agree to the requirements of this subparagraph in the reinsurance agreements. This subparagraph is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if an obligation is created in the agreement.(A) In the event of the failure of the assuming insurer to perform its obligations under the terms of the reinsurance agreement, the assuming insurer shall at the request of the ceding insurer:(I) Submit to the jurisdiction of a court of competent jurisdiction in a state of the United States.(II) Comply with the requirements necessary to give the court jurisdiction.(III) Abide by the final decision of the court or of an appellate court in the event of an appeal.(B) The assuming insurer shall designate a person as its true and lawful agent upon whom may be served a lawful process in an action, suit or proceeding instituted by or on behalf of the ceding company.(vi) Maintain a trust fund in a qualified United States financial institution, for the payment of valid claims of its United States policyholders and ceding insurers, their assigns and successors in interest.(A) In the case of a single assuming insurer, the trust shall consist of a trusteed account in an amount not less than the assuming insurer's liabilities attributable to business directly written or assumed in the United States. In addition, the assuming insurer shall maintain a trusteed surplus of at least $20 million except as provided in this clause. At any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least 3 calendar years, the commissioner with principal regulatory oversight of the trust may authorize a reduction in the required trusteed surplus but only after a finding, based on an assessment of the risk, that the new required surplus level is adequate for the protection of United States ceding insurers, policyholders and claimants in light of reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and will consider material risk factors, including when applicable the lines of business involved, the stability of the incurred loss estimates and the effect of the surplus requirements on the assuming insurer's liquidity or solvency. The minimum required trusteed surplus may not be reduced to an amount less than 30% of the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers covered by the trust.(B) In the case of a group of insurers which includes incorporated and unincorporated individual insurers, the trust shall consist of a trusteed account not less than the respective insurers' several liabilities attributable to business directly written or assumed in the United States. In addition, the group shall maintain a trusteed surplus of which $100 million shall be held jointly for the benefit of United States ceding insurers of any insurer of the group. The group shall make available to the Commissioner an annual certification of the solvency of each insurer by the group's domiciliary regulator and its independent public accountants.(4) Credit will be allowed when the reinsurance is ceded to a group of incorporated alien insurers under common administration if the group has met the conditions specified in this subsection and has been deemed to be a qualified reinsurer by the Commissioner. To be considered for qualification, the group shall meet the following conditions. The group shall:(i) Have continuously transacted an insurance business outside the United States for at least 3 years immediately prior to applying for qualification.(ii) File with the Commissioner evidence of its submission to the Commonwealth's jurisdiction.(iii) File with the application for qualification and annually thereafter substantially the same information as that required to be reported on the NAIC annual statement blank by licensed insurers.(iv) Submit to the Commonwealth's authority to examine its books and records and bear the expense of the examination.(v) File with the application for qualification and annually thereafter details on the soundness of its ceded reinsurance program, including the identity, domicile and premium volume for each retrocessionaire when the amount of reinsurance premium ceded is greater than or equal to $50,000. If the insurer demonstrates to the Commissioner's satisfaction its inability to provide the requested detail with respect to individual retrocessionaires because of its method of operation, the Commissioner will consider the acceptability of alternative information pertaining to the soundness of the insurer's ceded reinsurance program.(vi) Maintain an aggregate policyholder's surplus of at least $10 billion, calculated and reported in substantially the same manner as prescribed by the annual statement instructions and Accounting Practices and Procedures Manual of the NAIC.(vii) Maintain a trust fund in a qualified United States financial institution for the payment of valid claims of its United States policyholders and ceding insurers, their assigns and successors in interest. The trust shall be in an amount not less than the group's several liabilities attributable to business ceded by United States ceding insurers to any member of the group pursuant to reinsurance contracts issued in the name of the group. The group shall maintain a joint trusteed surplus of which $100 million shall be held jointly for the benefit of United States ceding insurers of any member of the group as additional security for the liabilities. Each member of the group shall make available to the Commissioner an annual certification of the member's solvency by the member's domiciliary regulator and its independent public accountant.(viii) Agree to the requirements of this subparagraph in the reinsurance agreements. This subparagraph is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if an obligation is created in the agreement.(A) In the event of the failure of the assuming insurer to perform its obligations under the terms of the reinsurance agreement, at the request of the ceding insurer the assuming insurer shall:(I) Submit to the jurisdiction of a court of competent jurisdiction in a state of the United States.(II) Comply with requirements necessary to give the court jurisdiction.(III) Abide by the final decision of the court or of an appellate court in the event of an appeal.(B) The assuming insurer shall designate a person as its true and lawful agent upon whom may be served a lawful process in an action, suit or proceeding instituted by or on behalf of the ceding company.(5) Credit will be allowed when the reinsurance is ceded to an assuming insurer that has been certified by the Commissioner as a reinsurer in this Commonwealth in accordance with § 161.3a (relating to requirements for certified reinsurers) and secures its obligations in accordance with § 161.3b (relating to calculation of credit for reinsurance regarding obligations secured with certified reinsurers).(6) Credit will be allowed when the reinsurance is ceded to an assuming insurer that is not a qualified reinsurer in an amount not exceeding the liabilities carried by the ceding insurer in accordance with section 319.1(b) of the act (40 P. S. § 442.1(b)).The provisions of this §161.3 amended May 24, 2013, effective 6/24/2013, 43 Pa.B. 2816; amended May 13, 2016, effective 6/13/2016, 46 Pa.B. 2415.The provisions of this §161.3 amended under sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. §§ 66, 186, 411 and 412); and section 319.1 of The Insurance Company Law of 1921 (40 P. S. § 442.1).
This section cited in 31 Pa. Code § 161.3b (relating to calculation of credit for reinsurance regarding obligations secured with certified reinsurers); 31 Pa. Code § 161.4 (relating to trust fund requirements); and 31 Pa. Code § 161.9 (relating to application).