2019 Arizona Revised Statutes
Title 20 - Insurance
§ 20-519 Nonrenewals, cancellations or revisions of ceded reinsurance agreements

Universal Citation: AZ Rev Stat § 20-519 (2019)

20-519. Nonrenewals, cancellations or revisions of ceded reinsurance agreements

A. A nonrenewal, cancellation or revision of a ceded reinsurance agreement that is not material does not have to be reported pursuant to section 20-517.

B. A report of a material nonrenewal, cancellation or revision of a ceded reinsurance agreement shall be reported, regardless of which party initiated the nonrenewal, cancellation or revision of ceded reinsurance, if one or more of the following conditions exist:

1. The entire cession has not been renewed or has been cancelled or revised and ceded indemnity and loss adjustment expense reserves after nonrenewal, cancellation or revision represent less than fifty per cent of the comparable reserves that would have been ceded if the nonrenewal, cancellation or revision had not occurred.

2. An authorized or accredited reinsurer has been replaced on an existing cession by an unauthorized reinsurer.

3. The collateral requirements that were previously established for unauthorized reinsurers have been reduced. For example, the requirement to collateralize incurred but not reported claim reserves is waived with respect to one or more unauthorized reinsurers newly participating in an existing cession.

C. For the purposes of subsection B, paragraph 2 or 3 of this section, an insurer shall file a report if the result of the revision affects more than ten per cent of the cession.

D. A report of a material nonrenewal, cancellation or revision of ceded reinsurance agreement pursuant to section 20-517 shall disclose the following information:

1. The effective date of the nonrenewal, cancellation or revision.

2. A description of the transaction, including an identification of the transaction initiator.

3. The purpose of or reason for the transaction.

4. The identity of the replacement reinsurers, if applicable.

E. An insurer shall report all material nonrenewals, cancellations or revisions of ceded reinsurance agreements on a nonconsolidated basis unless the insurer is part of a consolidated group of insurers that uses a pooling arrangement or one hundred per cent reinsurance agreement that affects the solvency and integrity of the insurer's reserves and the insurer ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than one million dollars total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than five per cent of the insurer's capital and surplus.

F. For the purposes of this section and section 20-517, a material nonrenewal, cancellation or revision is one that affects for property and casualty business, including accident and health business that is written as property and casualty business, more than fifty per cent of an insurer's ceded written premium, or for life, annuity and accident and health business, more than fifty per cent of an insurer's total reserve credit taken for business ceded, on an annualized basis as indicated in the insurer's most recently filed statement. A filing is not required pursuant to this subsection if the insurer's ceded written premium or the total reserve credit taken for business ceded represents, on an annualized basis, less than ten per cent of the direct plus assumed written premium or ten per cent of the statutory reserve requirement before any cession.

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