2013 North Dakota Century Code Title 26.1 Insurance Chapter 26.1-31.2 Reinsurance Credit
Download as PDF
CHAPTER 26.1-31.2
REINSURANCE CREDIT
26.1-31.2-01. Credit allowed a domestic ceding insurer.
Credit for reinsurance must be allowed a domestic ceding insurer as either an asset or a
deduction from liability on account of reinsurance ceded only when the reinsurer meets the
requirements of either subsection 1, 2, 3, 4, or 5. Credit will be allowed under subsection 1, 2, or
3 only with respect to cessions of a kind or class of business that the assuming insurer is
licensed or otherwise allowed to write or assume in its state of domicile or, in the case of a
United States branch of an alien assuming insurer, in the state through which it is entered and
licensed to transact insurance or reinsurance. If meeting the requirements of subsection 3 or 4,
the requirements of subsection 6 must also be met.
1. Credit must be allowed when the reinsurance is ceded to an assuming insurer or
nonprofit health service corporation which is licensed to transact insurance or
reinsurance in this state.
2. Credit must be allowed when the reinsurance is ceded to an assuming insurer which is
accredited as a reinsurer in this state. An accredited reinsurer is one which:
a. Files with the commissioner evidence of its submission to this state's jurisdiction;
b. Submits to this state's authority to examine its books and records;
c. Is 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, is entered through
and licensed to transact insurance or reinsurance in at least one state; and
d. Files annually with the commissioner 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; and either
(1) Maintains a surplus as regards policyholders in an amount which is not less
than twenty million dollars and whose accreditation has not been denied by
the commissioner within ninety days of its submission; or
(2) Maintains a surplus as regards policyholders in an amount less than twenty
million dollars and whose accreditation has been approved by the
commissioner.
No credit may be allowed a domestic ceding insurer if the assuming insurer's
accreditation has been revoked by the commissioner after notice and hearing.
3. Credit must be allowed when the reinsurance is ceded to an assuming insurer which is
domiciled and licensed in, or in the case of a United States branch of an alien
assuming insurer, is entered through, a state which employs standards regarding
credit for reinsurance substantially similar to those applicable under this statute and
the assuming insurer or United States branch of an alien assuming insurer:
a. Maintains a surplus as regards policyholders in an amount not less than twenty
million dollars; and
b. Submits to the authority of this state to examine its books and records.
Provided, however, that the requirement of subdivision a does not apply to reinsurance
ceded and assumed pursuant to pooling arrangements among insurers in the same
holding company system.
4. a. Credit must be allowed when the reinsurance is ceded to an assuming insurer
which maintains a trust fund in a qualified United States financial institution, as
defined in subsection 2 of section 26.1-31.2-03, for the payment of valid claims of
its United States policyholders and ceding insurers, their assigns, and successors
in interest. The assuming insurer shall report annually to the commissioner
information substantially the same as that required to be reported on the national
association of insurance commissioners annual statement form by licensed
insurers to enable the commissioner to determine the sufficiency of the trust fund.
In the case of a single assuming insurer, the trust must consist of a trusteed
account representing the assuming insurer's liabilities attributable to reinsurance
ceded by United States ceding insurers and, in addition, the assuming insurer
shall maintain a trusteed surplus of not less than twenty million dollars. In the
Page No. 1
5.
case of a group, including incorporated and individual unincorporated
underwriters, the trust must consist of a trusteed account representing the
group's liabilities attributable to business written in the United States and, in
addition, the group shall maintain a trusteed surplus of which one hundred million
dollars must be held jointly for the benefit of United States ceding insurers of any
member of the group for all years of account; the incorporated members of the
group may not be engaged in any business other than underwriting as a member
of the group and are subject to the same level of solvency regulation and control
by the group's domiciliary regulator as are the unincorporated members. Within
ninety days after its financial statements are due to be filed with the group's
domiciliary regulator, the group shall provide to the commissioner an annual
certification of the solvency of each underwriter by the group's domiciliary
regulator or if a certification is unavailable, financial statements prepared by each
underwriter's independent public accountants.
b. In the case of a group of incorporated insurers under common administration
which complies with the filing requirements contained in subdivision a, and which
has continuously transacted an insurance business outside the United States for
at least three years immediately prior to making application for accreditation and
submits to this state's authority to examine its books and records and bears the
expense of the examination, and which has aggregate policyholders' surplus of
ten billion dollars; the trust must be in an amount equal to 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
such group plus the group shall maintain a joint trusteed surplus of which one
hundred million dollars must be held jointly and exclusively for the benefit of
United States ceding insurers of any member of the group as additional security
for any such liabilities. Within ninety days after its financial statements are due to
be filed with the group's domiciliary regulator, 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 financial statements of each
underwriter member prepared by its independent public accountant.
c. The trust and any amendments to the trust must be established in a form
approved by the commissioner of the state where the trust is domiciled or the
commissioner of another state who, pursuant to the terms of the trust instrument,
has accepted principal regulatory oversight of the trust. The form of the trust and
any trust amendments also must be filed with the commissioner of every state in
which the ceding insurer beneficiaries of the trust are domiciled. The trust
instrument must provide that contested claims must be valid and enforceable
upon the final order of any court of competent jurisdiction in the United States.
The trust must vest legal title to its assets in the trustees of the trust for its United
States policyholders and ceding insurers, their assigns, and successors in
interest. The trust and the assuming insurer are subject to examination as
determined by the commissioner. The trust described herein must remain in effect
for as long as the assuming insurer, or any member or former member of a group
of insurers, has outstanding obligations due under the reinsurance agreements
subject to the trust.
d. No later than February twenty-eighth of each year the trustees of the trust shall
report to the commissioner in writing setting forth the balance of the trust and
listing the trust's investments at the preceding yearend and shall certify the date
of termination of the trust, if so planned, or certify that the trust will not expire prior
to the next following December thirty-first.
Credit must be allowed when the reinsurance is ceded to an assuming insurer not
meeting the requirements of subsection 1, 2, 3, or 4 but only with respect to the
insurance of risks located in jurisdictions where the reinsurance is required by
applicable law or regulation of that jurisdiction.
Page No. 2
6.
If the assuming insurer is not licensed or accredited to transact insurance or
reinsurance in this state, the credit permitted by subsections 3 and 4 may not be
allowed unless the assuming insurer agrees in the reinsurance agreements:
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, at the request of
the ceding insurer, shall submit to the jurisdiction of any court of competent
jurisdiction in any state of the United States, will comply with all requirements
necessary to give such court jurisdiction, and will abide by the final decision of
such court or of any appellate court in the event of an appeal; and
b. To designate the commissioner or a designated attorney as its true and lawful
attorney upon whom may be served any lawful process in any action, suit, or
proceeding instituted by or on behalf of the ceding company.
This provision is not intended to conflict with or override the obligation of the parties to
a reinsurance agreement to arbitrate their disputes, if such an obligation is created in
the agreement.
26.1-31.2-02. Reduction from liability for reinsurance ceded by a domestic insurer to
an assuming insurer.
A reduction from liability for the reinsurance ceded by a domestic insurer to an assuming
insurer not meeting the requirements of section 26.1-31.2-01 must be allowed in an amount not
exceeding the liabilities carried by the ceding insurer and such reduction must be in the amount
of funds held by or on behalf of the ceding insurer, including funds held in trust for the ceding
insurer, under a reinsurance contract with the assuming insurer as security for the payment of
obligations thereunder, if the security is held in the United States subject to withdrawal solely by,
and under the exclusive control of, the ceding insurer; or, in the case of a trust, held in a
qualified United States financial institution, as defined in subsection 2 of section 26.1-31.2-03.
This security may be in the form of:
1. Cash.
2. Securities listed by the securities valuation office of the national association of
insurance commissioners and qualifying as admitted assets.
3. Clean, irrevocable, unconditional, and evergreen letters of credit issued or confirmed
by a qualified United States institution, as defined in subsection 1 of section
26.1-31.2-03, effective no later than December thirty-first in respect of the year for
which filing is being made, and in the possession of, or in trust for, the ceding company
on or before the filing date of its annual statement. Letters of credit meeting applicable
standards of issuer acceptability as of the dates of their issuance or confirmation must,
notwithstanding the issuing or confirming institution's subsequent failure to meet
applicable standards of issuer acceptability, continue to be acceptable as security until
their expiration, extension, renewal, modification, or amendment, whichever first
occurs.
26.1-31.2-03. Qualified United States financial institutions.
1. For purposes of subsection 3 of section 26.1-31.2-02, a "qualified United States
financial institution" means an institution that:
a. Is organized, or in case of a United States office of a foreign banking
organization, is licensed, under the laws of the United States or any state thereof;
b. Is regulated, supervised, and examined by United States federal or state
authorities having regulatory authority over banks and trust companies;
c. Has been determined by either the commissioner, or the securities valuation
office of the national association of insurance commissioners, to meet such
standards of financial condition and standing as are considered necessary and
appropriate to regulate the quality of financial institutions whose letters of credit
will be acceptable to the commissioner.
2. A "qualified United States financial institution" means, for purposes of those provisions
of this chapter specifying those institutions that are eligible to act as a fiduciary of a
trust, an institution that:
Page No. 3
a.
b.
Is organized, or in the case of a United States branch or agency office of a
foreign banking organization, is licensed, under the laws of the United States or
any state thereof and has been granted authority to operate with fiduciary
powers; and
Is regulated, supervised, and examined by federal or state authorities having
regulatory authority over banks and trust companies.
26.1-31.2-04. Rulemaking authority.
The commissioner may adopt reasonable rules for the implementation and administration of
this chapter.
26.1-31.2-05. Reinsurance agreements affected.
Sections 26.1-31.2-01, 26.1-31.2-02, 26.1-31.2-03, and 26.1-31.2-04 apply to all cessions
after July 7, 1991, under reinsurance agreements which have had an inception, anniversary, or
renewal date not less than six months after July 7, 1991.
Page No. 4
Disclaimer: These codes may not be the most recent version. North Dakota may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
