2006 Utah Code - 31A-27-330.6 — Reinsurance commutations.

     31A-27-330.6.   Reinsurance commutations.
     Notwithstanding Section 31A-27-330.5, when the insurer has been a party to a reinsurance agreement:
     (1) (a) The liquidator may negotiate a voluntary commutation and release of all obligations arising from the agreements.
     (b) (i) Subject to Subsection (1)(b)(ii), a commutation and release agreement voluntarily entered into by the parties shall be:
     (A) commercially reasonable;
     (B) actuarially sound; and
     (C) made in the best interests of the creditors of the insurer.
     (ii) A commutation and release agreement voluntarily entered into by the parties that exceeds $100,000 shall be:
     (A) reviewed by the court; and
     (B) approved if the agreement meets the standards described in Subsection (1)(b)(i).
     (2) At any time following a five-year period subsequent to the entry of the order of liquidation, the liquidator may apply to the court, with notice to the other party, for an order requiring that parties to the reinsurance agreement submit their commutation proposal to a panel of three arbitrators.
     (3) (a) Venue for the arbitration shall be:
     (i) within the district of the liquidation court's jurisdiction; or
     (ii) such other location as may be agreed to by the parties.
     (b) (i) Upon the court's determination that commutation would be in the best interests of the creditors of the liquidation estate, the court shall require that the liquidator and the other party each appoint an arbitrator within 30 days.
     (ii) Within 30 days after appointment of the two arbitrators under Subsection (3)(b)(i), the court shall appoint an independent, impartial, disinterested arbitrator qualified by actuarial training in the insurance and reinsurance industry.
     (c) Within 60 days following the appointment of the third arbitrator under Subsection (3)(b), the parties shall submit to the arbitration panel their commutation proposals and other documents and information relevant to the determination of the parties' rights and obligations under the reinsurance agreement to be commuted, including:
     (i) a written review of open claim files; and
     (ii) an actuarial estimate of incurred-but-not-reported losses.
     (d) (i) Within 60 days following the parties' submissions under Subsection (3)(c):
     (A) the arbitration panel shall issue an award specifying the general terms of a commercially reasonable and actuarially sound commutation and release agreement; and
     (B) the liquidator shall promptly submit the award to the court.
     (ii) The court shall confirm the arbitration panel's award absent proof of statutory grounds for vacating or modifying the award.
     (e) The time periods established in this Subsection (3) may be extended upon the consent of the parties or by order of the court, for good cause shown.
     (f) If the arbitration panel finds, upon request of either party, that payment of or enforcement of the arbitration panel's award would likely cause the insolvency of the affected reinsurer, the portion of the award related to outstanding and incurred but not reported losses may not be enforced and payment of the obligations may not be accelerated, except:

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     (i) to the extent that the liquidator agrees to the payment, after consultation with the reinsurer's domiciliary commissioner; and
     (ii) on the liquidator's determination that enforcement of the award will not cause the reinsurer's insolvency.
     (g) Except as provided in Subsection (4), nothing in this section may be construed to supersede or impair any provision in a reinsurance agreement that establishes a commercially reasonable and actuarially sound method for valuing and commuting the obligations of the parties to the reinsurance agreement by providing in the contract the specific methodology to be used for valuing and commuting the obligations.
     (4) (a) A commutation provision is not effective if it is demonstrated to the court that the provision was entered into in contemplation of the insolvency of one or more of the parties.
     (b) A contractual commutation provision entered into within one year of the liquidation order of the insurer shall be rebuttably presumed to have been entered into in contemplation of insolvency.
     (5) Sections 31A-27-330 and 31A-27-330.5 and this section apply to liquidation proceedings that are pending on April 29, 1996, and to all future liquidations.

Amended by Chapter 105, 2004 General Session