2006 Code of Virginia § 38.2-1316.2 - Credit allowed a domestic ceding insurer

38.2-1316.2. Credit allowed a domestic ceding insurer.

A. Except as provided in 38.2-1316.4, credit shall be allowed a domesticceding insurer for reinsurance ceded only when the assuming insurer meets oneof the following criteria:

1. Credit shall be allowed when the assuming insurer is licensed to transactinsurance in this Commonwealth.

2. Credit shall be allowed when the assuming insurer is accredited as areinsurer in this Commonwealth. An accredited reinsurer is one which:

a. Files with the Commission evidence of its submission to the Commission'sjurisdiction;

b. Submits to the Commission'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, isentered through and licensed to transact insurance or reinsurance in at leastone state; and

d. Files annually with the Commission a copy of its annual statement filedwith the insurance department of its state of domicile or entry and a copy ofits most recent audited financial statement, and either (i) maintains asurplus to policyholders or, in the case of an alien insurer, a trusteedsurplus, in an amount which is not less than $20 million and whoseaccreditation has not been denied by the Commission within ninety days of itsinitial submission; or (ii) maintains a surplus to policyholders or, in thecase of an alien insurer, a trusteed surplus, in an amount less than $20million and whose accreditation has been approved by the Commission.

However, no credit shall be allowed for reinsurance ceded to an accreditedreinsurer if the assuming insurer's standing as an accredited reinsurer hasbeen denied or revoked by the Commission. Such standing shall not be revokedby the Commission until after the assuming insurer has been given ten days'notice of the reasons for the proposed revocation and an opportunity tointroduce evidence and be heard. Any hearing authorized by this subsectionmay be informal, and the required notice may be waived by the Commission andthe insurer. Furthermore, the Commission may require additional reports,exhibits or statements as it determines necessary to secure completeinformation concerning the condition and affairs of any accredited reinsurer.

3. Credit shall be allowed when the assuming insurer is domiciled andlicensed in or, in the case of a United States branch of an alien insurer, isentered through, a state which employs standards regarding credit forreinsurance substantially similar to those applicable under this statute andthe assuming insurer or United States branch of an alien assuming insurer:

a. Submits to the authority of the Commission to examine its books andrecords; and

b. Maintains a surplus to policyholders in an amount not less than $20million. However, unless specifically required by the Commission, thissurplus requirement shall be deemed waived when reinsurance is ceded andassumed pursuant to pooling arrangements among insurers in the same holdingcompany system.

4. Credit shall be allowed when the assuming insurer maintains a trust fundin a qualified United States financial institution for the payment of thevalid claims of its United States policyholders and ceding insurers, theirassigns and successors in interest. The assuming insurer shall reportannually to the Commission information substantially the same as thatrequired to be reported on the National Association of InsuranceCommissioners (NAIC) Annual Statement form by licensed insurers to enable theCommission to determine the sufficiency of the trust fund.

a. In the case of a single assuming insurer, the trust shall consist of atrusteed account representing the assuming insurer's liabilities attributableto business written in the United States, and in addition, the assuminginsurer shall maintain a trusteed surplus amount not less than $20 million.

b. In the case of a group, including incorporated and individualunincorporated underwriters, the trust shall consist of a trusteed accountrepresenting the group's liabilities attributable to business written in theUnited States and in addition, the group shall maintain a trusteed surplus ofwhich $100 million shall be held jointly for the benefit of United Statesceding insurers of any member of the group, the incorporated members of whichshall not be engaged in any business other than underwriting as a member ofthe group and shall be subject to the same level of solvency regulation andcontrol by the group's domiciliary regulator as are the unincorporatedmembers; and the group shall make available to the Commission an annualcertification of the solvency of each underwriter by the group's domiciliaryregulator and its independent public accountants.

c. In the case of a group of incorporated insurers under commonadministration which complies with the filing requirements contained in theprevious paragraph, and which has continuously transacted an insurancebusiness outside the United States for at least three years, and submits tothe Commission's authority to examine its books and records and bears theexpense of the examination, and which has aggregate policyholders' surplus of$10 billion; the trust shall be in an amount equal to the group's severalliabilities attributable to business ceded by United States ceding insurersto any member of the group pursuant to reinsurance contracts issued in thename of such group. In addition, the group shall maintain a joint trusteedsurplus of which $100 million shall be held jointly for the benefit of UnitedStates ceding insurers of any member of the group as additional security forany such liabilities, and each member of the group shall make available tothe Commission an annual certification of the member's solvency by themember's domiciliary regulator and its independent public accountant.

B. The trusts described in subdivision 4 of subsection A shall be establishedin a form acceptable to the Commission.

1. The trust instrument shall provide that contested claims shall be validand enforceable upon the final order of any court of competent jurisdictionin the United States.

2. The trust shall vest legal title to its assets in the trustees of thetrust for its United States policyholders and ceding insurers, their assignsand successors in interest.

3. The trust and the assuming insurer shall be subject to examination asdetermined by the Commission.

4. The trust described herein must remain in effect for as long as theassuming insurer shall have outstanding obligations due under the reinsuranceagreements subject to the trust.

5. No later than February 28 of each year the trustees of the trust shallreport to the Commission in writing setting forth the balance of the trustand listing the trust's investments at the preceding year end and shallcertify the date of termination of the trust, if so planned, or certify thatthe trust shall not expire prior to the next following December 31.

(1991, c. 264; 1994, c. 647.)