S.D. Admin. R. 20:06:30:16

Current through Register Vol. 51, page 67, December 16, 2024

Section 20:06:30:16 - Requirements applicable to a covered policy to obtain credit for reinsurance

Subject to the exemptions described in § 20:06:30:18 and the provisions of § 20:06:30:17, credit for reinsurance shall be allowed with respect to ceded liabilities pertaining to a covered policy pursuant to SDCL Ch. 58-26 if, in addition to all other requirements imposed by law or rule, the following requirements are met on a treaty-by-treaty basis:

(1) The ceding insurer's statutory policy reserves with respect to the covered policy are established in full and in accordance with the applicable requirements of SDCL 58-26-45 to 5826-105, inclusive, and related rules and actuarial guidelines, and credit claimed for any reinsurance treaty subject to §§ 20:06:30:13 to 20:06:30:20, inclusive, do not exceed the proportionate share of those reserves ceded under the reinsurance treaty;

(2) The ceding insurer determines the required level of primary security with respect to each reinsurance treaty subject to §§ 20:06:30:13 to 20:06:30:20, inclusive, and provides support for its calculation as determined to be acceptable to the director;

(3) 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 under the reinsurance treaty within the meaning of SDCL 58-14-16, on a funds withheld, trust, or modified coinsurance basis;

(4) 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 subdivision 20:06:30:16(3), are held by or on behalf of the ceding insurer as security under the reinsurance treaty within the meaning of SDCL 58-14-16;

(5) Any trust used to satisfy the requirements of this section shall comply with all of the conditions and qualifications of § 20:06:31:06, except that:

(a) Funds consisting of primary security or other security held in trust, shall for the purposes identified in § 20:06:30:15, be valued according to the valuation rules set forth in § 20:06:30:17, as applicable;

(b) There are no affiliate investment limitations with respect to any security held in the trust if that security is not needed to satisfy the requirements of subdivision 20:06:30:16(3);

(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 (when aggregated with primary security outside the trust that is held by or on behalf of the ceding insurer in the manner required by subdivision 20:06:30:16(3)) below one hundred two percent of the level required by subdivision 20:06:30:16(3) at the time of the withdrawal or substitution; and

(d) The determination of reserve credit in § 20:06:31:13 shall be determined according to the valuation rules set forth in § 20:06:30:15, as applicable; and

(6) The reinsurance treaty has been approved by the director.

S.D. Admin. R. 20:06:30:16

49 SDR 009, effective 8/9/2022

General Authority: SDCL 58-14-1, 58-26-45.1.

Law Implemented: SDCL 58-14-17.