Utah Admin. Code 590-173-9

Current through Bulletin 2024-20, October 15, 2024

Section R590-173-9 - Credit for Reinsurance - Reinsurer is from a Reciprocal Jurisdiction

(1) Credit is allowed for reinsurance ceded by a domestic insurer to an assuming insurer that is licensed to write reinsurance by, and has its head office or is domiciled in, a reciprocal jurisdiction, and meets the requirements of this rule.

(2) Credit is allowed when reinsurance is ceded from an insurer domiciled in this state to an assuming insurer if the assuming insurer:

(a) is licensed to transact reinsurance by, and has its head office or is domiciled in, a reciprocal jurisdiction;

(b) meets and maintains minimum capital and surplus, or its equivalent, calculated on at least an annual basis as of the preceding December 31 or on the annual date reported to the reciprocal jurisdiction; and

(c) the minimum capital and surplus is confirmed under Subsection (2)(g) according to the methodology of its domiciliary jurisdiction, in the following amounts:

(A) no less than $250 million; or

(B) if the assuming insurer is an association, including incorporated and individual unincorporated underwriters:

(I) minimum capital and surplus equivalents, net of liabilities, or own funds of the equivalent of at least $250 million; and

(II) a central fund containing a balance of the equivalent of at least $250 million;

(d) meets and maintains on an ongoing basis a minimum solvency or capital ratio as follows:

(i) if the assuming insurer has its head office or is domiciled in a reciprocal jurisdiction as defined in Subsection R590-173-3(12)(a), the ratio specified in the applicable covered agreement;

(ii) if the assuming insurer is domiciled in a reciprocal jurisdiction as defined in Subsection R590-173-3(12)(b), a risk-based capital ratio of 300% of the authorized control level, calculated according to the formula developed by the NAIC; or

(iii) if the assuming insurer is domiciled in a reciprocal jurisdiction as defined in Subsection R590-173-3(12)(c), after consultation with the reciprocal jurisdiction and considering any recommendations published through the NAIC committee process, such solvency or capital ratio as the commissioner determines to be an effective measure of solvency;

(e) provides adequate assurance in a completed Form RJ-1, available on the department's website, https://insurance.utah.gov, that the assuming insurer:

(i) will provide prompt written notice and explanation to the commissioner if:

(A) it falls below the minimum requirements set forth in Subsection (2)(b) or (2)(c); or

(B) any regulatory action is taken against it for serious noncompliance with applicable law;

(ii) consents to the jurisdiction of the courts of this state and appoints the commissioner as agent for service of process;

(iii) consents in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer that is enforceable where the judgment was obtained;

(iv) includes in every reinsurance agreement a requirement that it will provide security in an amount equal to 100% of liabilities attributable to reinsurance ceded pursuant to the agreement if it resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained, or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its legal successor on behalf of its estate;

(v) confirms that it is not participating in a solvent scheme of arrangement that involves this state's ceding insurers;

(vi) on entering into a solvent scheme of arrangement, agrees to:

(A) notify the ceding insurer and the commissioner; and

(B) provide 100% security to the ceding insurer consistent with the terms of the scheme, and in a form consistent with the provisions of law and this rule; and

(vii) agrees in writing to meet the applicable information filing requirements of Subsection (2)(f);

(f) provides, if requested by the commissioner, on behalf of itself and any legal predecessors, the following documentation:

(i) for the two years preceding entry into the reinsurance agreement and on an annual basis thereafter, its annual audited financial statements, in accordance with the applicable law of the jurisdiction of its head office or domiciliary jurisdiction, including the external audit report;

(ii) for the two years preceding entry into the reinsurance agreement, its solvency and financial condition report or actuarial opinion, if filed with its supervisor;

(iii) before entry into the reinsurance agreement and not more than semi-annually thereafter, an updated list of all disputed and overdue reinsurance assumed from ceding insurers domiciled in the United States; and

(iv) before entry into the reinsurance agreement and not more than semi-annually thereafter, information regarding its:

(A) assumed reinsurance by the ceding insurer;

(B) ceded reinsurance by the assuming insurer; and

(C) reinsurance recoverables on its paid and unpaid losses allowing for the evaluation of the criteria set forth in Subsection (2)(g);

(g) maintains a practice of promptly paying reinsurance claims as follows:

(i) no more than 15% of its reinsurance recoverables are overdue and in dispute, as reported to the commissioner;

(ii) no more than 15% of its ceding insurers or reinsurers have overdue reinsurance recoverables on paid losses of 90 days or more that are:

(A) not in dispute and exceed for each ceding insurer $100,000; or

(B) as specified in a covered agreement; or

(iii) the aggregate amount of reinsurance recoverables on undisputed paid losses are:

(A) overdue by 90 days or more and exceed $50 million; or

(B) as specified in a covered agreement; and

(h) complies with Subsections (2)(b) and (2)(c) as confirmed by its supervisory authority to the commissioner on an annual basis.

(3) An assuming insurer may provide the commissioner with information on a voluntary basis.

(4) An assuming insurer's consent to the jurisdiction of the courts of this state and to appointing the commissioner as agent for service of process shall be included in each reinsurance agreement under the commissioner's jurisdiction.

(5) Parties to a reinsurance agreement may agree to alternative dispute resolution mechanisms, except to the extent such agreements are unenforceable under applicable insolvency or delinquency laws.

(6)

(a) The commissioner shall create and publish a list of reciprocal jurisdictions that includes a reciprocal jurisdiction as defined under Subsection R590-173-3(12)(a), R590-173-3(12)(b), or R590-173-3(12)(c).

(b) The commissioner shall consider a reciprocal jurisdiction included on the NAIC list of reciprocal jurisdictions.

(7) The commissioner may approve a jurisdiction that does not appear on the NAIC list of reciprocal jurisdictions as provided by applicable law, regulation, or in accordance with criteria published through the NAIC committee process.

(8)

(a) The commissioner may remove a jurisdiction from the list of reciprocal jurisdictions on a determination that the jurisdiction no longer meets one or more of the requirements of a reciprocal jurisdiction, as provided by applicable law or in accordance with a process published through the NAIC committee process.

(b) The commissioner may not remove from the list a reciprocal jurisdiction defined under Subsection R590-173-3(12)(a), R590-173-3(12)(b), or R590-173-3(12)(c).

(c) When removing a reciprocal jurisdiction from the commissioner's list, credit for reinsurance ceded to an assuming insurer domiciled in that jurisdiction is permitted, if otherwise allowed by law.

(9) The commissioner shall create and publish a list of assuming insurers that qualify as reinsurers from reciprocal jurisdictions satisfying the conditions of this section and where cessions are granted reinsurance credit.

(a) If an NAIC accredited jurisdiction determines that the conditions set forth in Subsection (9)(b) are met, the commissioner may:

(i) defer to that jurisdiction's determination;

(ii) add the assuming insurer to the list of insurers where cessions are granted reinsurance credit; and

(iii) accept financial documentation filed with another NAIC accredited jurisdiction or with the NAIC under Subsection (9)(b).

(b) A request to defer to another NAIC accredited jurisdiction's determination shall include:

(i) a completed Form RJ-1, available on the department's website, https://insurance.utah.gov; and

(ii) additional information the commissioner may require.

(c) Upon receipt of a request under Subsection (9)(b), the commissioner shall:

(i) notify other states of the request through the NAIC committee process; and

(ii) provide relevant information about the determination of eligibility.

(10) If the commissioner determines that an assuming insurer no longer meets one or more of the requirements under this section, the commissioner may revoke or suspend the eligibility of the assuming insurer.

(a) During a suspension period, a reinsurance agreement may not be issued, amended, or renewed after the effective date of the suspension qualifies for credit except to the extent that the assuming insurer's obligations under the contract are secured under Section R590-173-11.

(b) Credit for reinsurance may not be available after the effective date of the revocation for a reinsurance agreement entered into before the date of revocation, except to the extent that the assuming insurer's obligations under the contract are secured in a form acceptable to the commissioner and consistent with Section R590-173-11.

(11) Before denying statement credit, requiring security under Subsection (10), or adopting a similar requirement with the same regulatory impact to requiring security, the commissioner shall:

(a) notify the following that the assuming insurer no longer satisfies one of the conditions listed in Subsection (2):

(i) the ceding insurer;

(ii) the assuming insurer; and

(iii) the assuming insurer's supervisory authority;

(b) give the assuming insurer:

(i) 30 days to submit a plan to remedy the defect; and

(ii) 90 days to remedy the defect unless a shorter period is necessary to protect policyholders and consumers;

(c) take an action described in Subsection (11) if the defect has not been remedied; and

(d) provide the assuming insurer a written explanation for action taken.

(12) A ceding insurer may seek a court order that requires an assuming insurer in receivership, rehabilitation, or liquidation to post security for the assuming insurer's outstanding liabilities.

Utah Admin. Code R590-173-9

Amended by Utah State Bulletin Number 2017-3, effective 1/10/2017

Adopted by Utah State Bulletin Number 2022-12, effective 6/7/2022