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Alaska Statutes.

Title 21. Insurance

Chapter 12. Kinds of Insurance, Limits of Risk, and Reinsurance

Section 20. Reinsurance Credit Allowed a Domestic Ceding Insurer.

AS 21.12.020. Reinsurance Credit Allowed a Domestic Ceding Insurer.

(a) Credit for reinsurance transactions shall be allowed a domestic ceding insurer as either an asset or a deduction from liability on account of reinsurance ceded only with respect to cessions of a kind or class of business that the assuming insurer is licensed or permitted 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 and only if the reinsurance is ceded to an

(1) assuming insurer that is licensed to transact insurance or reinsurance in this state;

(2) assuming insurer that is accredited as a reinsurer in this state; an accredited reinsurer is one that

(A) files evidence of submission to this state's jurisdiction, submits to this state's authority to examine its books and records under AS 21.06.120 , is licensed to transact insurance or reinsurance in at least one state that is accredited by the National Association of Insurance Commissioners, or, in the case of a United States branch of an alien admitted insurer, is entered through and licensed to transact insurance or reinsurance in at least one state that is accredited by the National Association of Insurance Commissioners;

(B) maintains at least $20,000,000 in policyholder surplus and whose accreditation has not been denied by the director within 90 days after application to the director, or maintains less than $20,000,000 in policyholder surplus and whose application for accreditation has been approved by the director; and

(C) files annually with the director a copy of the reinsurer's annual financial statement filed with the insurance department of the reinsurer's state of domicile or state of entry and a copy of the reinsurer's most recent audited financial statement;

(3) assuming insurer that is domiciled in a state, or, in the case of a United States branch of an alien assuming insurer, is entered through a state accredited by the National Association of Insurance Commissioners that employs standards regarding credit for reinsurance ceded substantially similar to those applicable under (1) and (2) of this subsection, the assuming insurer maintains a policyholder surplus of at least $20,000,000, and the assuming insurer submits to the authority of this state to examine its books and records; the surplus requirements in this paragraph do not apply to reinsurance ceded and assumed under a pooling arrangement among insurers in the same holding company system;

(4) assuming alien insurer that

(A) maintains a trust fund in a qualified United States financial institution for the payment of the valid claims of its United States policyholders and ceding insurers, and their assigns and successors in interest, that conforms to the following requirements:

(i) the trust and each amendment to the trust shall be established in a form approved by the insurance supervisory official of the state where the trust is domiciled or the insurance supervisory official of another state who, under the terms of the trust instrument, has accepted responsibility for regulatory oversight of the trust; the form of the trust and each trust amendment shall be filed with the insurance supervisory official of every state in which the beneficiaries of the trust are domiciled; the trust instrument must provide that contested claims are valid and enforceable upon the final order of any court of competent jurisdiction in the United States; the trust shall 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 director, and the assuming insurer shall submit to examination of its books and records by the director and bear the expense of examination; the trust must remain in effect for so long as the assuming insurer has outstanding liabilities due under the reinsurance agreements subject to the trust;

(ii) on or before March 1 of each year the trustees shall report in writing to the director on the balance of the trust and list the trust's investments at the end of the preceding year, and shall certify the date of termination of the trust, if so planned, or certify that the trust does not expire before the following December 31;

(iii) in the case of a single assuming insurer, the trust shall consist of trust money representing the assuming insurer's liabilities attributable to business written in the United States and, in addition, include a trust surplus of not less than $20,000,000; the single assuming insurer shall make available to the director an annual certification of the insurer's solvency by an independent certified public accountant or an accountant holding a substantially equivalent designation as determined by the director;

(iv) in the case of a group, including incorporated and individual unincorporated insurers, the trust shall consist of trust money representing the group's liabilities attributable to business ceded by the United States domiciled ceding insurers and, in addition, include a trust surplus not less than $100,000,000 held jointly for the benefit of the United States domiciled ceding insurers or 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 90 days after its financial statements are due to be filed with the group's domiciliary regulator, the group shall make available to the director an annual certification of the solvency of each insurer by the group's domiciliary regulator or, if the certification is unavailable, financial statements, prepared by an independent certified public accountant, or an accountant holding a substantially equivalent designation as determined by the director, for each underwriter member of the group;

(v) in the case of a group of incorporated insurers under common administration that complies with the reporting requirements contained in (ii) of this subparagraph, that has continuously transacted an insurance business outside the United States for at least three years immediately before making application for accreditation, that submits to this state's authority to examine its books and records and bears the expense of the examination, and that has aggregate policyholders' surplus of $10,000,000,000, the trust shall be in an amount equal to the group's several liabilities attributable to business ceded by United States domiciled ceding insurers to a member of the group under reinsurance contracts issued in the name of the group, and the group shall maintain a joint trustee surplus, of which $100,000,000 shall be held jointly for the benefit of United States domiciled ceding insurers of a member of the group as additional security for the group's liabilities, and, within 90 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 director an annual certification of the underwriter member's solvency by the member's domiciliary regulator and financial statement of each underwriter member prepared by its independent certified public accountant, or an accountant holding a substantially equivalent designation as determined by the director; and

(B) reports annually to the director 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 director to determine the sufficiency of the trust fund;

(5) assuming insurer that does not meet the requirements of (1) - (4) of this subsection, 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.

(b) If the assuming insurer is not licensed or accredited to transact insurance or reinsurance in this state, the credit permitted by (a)(1) - (4) of this section may not be allowed unless the assuming insurer agrees in the reinsurance agreements

(1) that 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 a court of competent jurisdiction in any state of the United States, will comply with all requirements necessary to give the court jurisdiction and will abide by the final decision of the court or of an appellate court in the event of an appeal; 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 reinsurance agreement; and

(2) to designate the director or an attorney resident in the United States as its true and lawful attorney upon whom may be served lawful process in an action, suit, or proceeding instituted by or on behalf of the ceding insurer.

(c) A reduction from liability, for reinsurance ceded to an assuming insurer not meeting the requirements of (a) of this section, shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer. The reduction shall be equal to the amount of money held by or on behalf of the ceding insurer, including money held in trust for the ceding insurer, under a reinsurance contract with the assuming insurer as security for the payment of obligations under it, 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. The security must be in the form of

(1) cash;

(2) securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners that qualify as admitted assets under AS 21.21;

(3) clean, irrevocable, unconditional letters of credit that contain an evergreen clause issued or confirmed by a qualified United States financial institution not later than December 31 in the year for which filing is made, and in the possession of, or in trust for, the ceding insurer on or before the filing date of the ceding insurer's annual statement; letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance or confirmation shall, 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 occurs first; or

(4) other security acceptable to and approved in advance by the director.

(d) Notwithstanding the other provisions of this section, credit may not be allowed a domestic ceding insurer unless the reinsurance contract provides for payment by the assuming insurer on the basis of the liability of the ceding domestic insurer under the insurance contracts reinsured without diminution because of the insolvency of the ceding domestic insurer.

(e) Upon request of the director, an insurer shall promptly inform the director, in writing, of the cancellation or other material change in any of its reinsurance contracts or arrangements.

(f) In this section, "qualified United States financial institution" means an institution that,

(1) for the purposes of (c)(3) of this section,

(A) is organized or, in the case of a United States office of a foreign banking organization, is licensed under the laws of the United States or a state of the United States;

(B) is regulated, supervised, and examined by United States federal or state authorities having regulatory authority over banks and trust companies; and

(C) has been determined by either the director or the Securities Valuation Office of the National Association of Insurance Commissioners to meet the standards of financial condition and standing that are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit are acceptable to the director;

(2) for the purposes of the provisions of this section other than (c)(3) of this section, an institution that

(A) is organized or, in the case of a United States branch or agency office of a foreign banking organization, licensed under the laws of the United States or a state of the United States, and has been granted authority to operate with fiduciary powers; and

(B) is regulated, supervised, and examined by United States federal or state authorities having regulatory authority over banks and trust companies.

(g) An insurer may receive credit for reinsurance transactions if the reinsurance agreement meets all applicable requirements established by the director.

(h) A domestic ceding insurer may not be allowed credit if the assuming insurer's accreditation has been revoked by the director.

(i) In this section, a "reinsurance transaction" means a transaction stemming from a contract by which the assuming insurer agrees to indemnify the ceding insurer in whole or in part against liability or losses that the ceding insurer might incur under a separate contract of insurance with its insured.

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This version of the Alaska Statutes is current through December, 2004. The Alaska Statutes were automatically converted to HTML from a plain text format. Every effort has been made to ensure their accuracy, but this can not be guaranteed. If it is critical that the precise terms of the Alaska Statutes be known, it is recommended that more formal sources be consulted. For statutes adopted after the effective date of these statutes, see, Alaska State Legislature If any errors are found, please e-mail Touch N' Go systems at E-mail. We hope you find this information useful.

Last modified 9/3/2005