Full Text of SB0668 97th General Assembly
SB0668sam002 97TH GENERAL ASSEMBLY | Sen. Antonio Muñoz Filed: 4/11/2011
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| 1 | | AMENDMENT TO SENATE BILL 668
| 2 | | AMENDMENT NO. ______. Amend Senate Bill 668 by replacing | 3 | | everything after the enacting clause with the following:
| 4 | | "Section 5. The Illinois Insurance Code is amended by | 5 | | changing Section 173.1 as follows:
| 6 | | (215 ILCS 5/173.1) (from Ch. 73, par. 785.1)
| 7 | | Sec. 173.1. Credit allowed a domestic ceding insurer.
| 8 | | (1) Except as otherwise provided under Article VIII 1/2 of | 9 | | this Code and
related provisions of the Illinois Administrative | 10 | | Code, credit for
reinsurance shall be allowed a domestic ceding | 11 | | insurer as
either an admitted asset or a deduction from | 12 | | liability on account of
reinsurance ceded only when the | 13 | | reinsurer meets the requirements of
subsection (1)(A) or (B) or | 14 | | (C) or (D) or (E) or (F) .
Credit shall be allowed under | 15 | | subsection (1)(A) or (B) only as respects
cessions of those | 16 | | kinds or classes of business in which the assuming insurer is
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| 1 | | licensed or otherwise permitted to write or assume in its state | 2 | | of domicile, or
in the case of a U.S. branch of an alien | 3 | | assuming insurer, in the state through
which it is entered and | 4 | | licensed to transact insurance or reinsurance. Credit
shall be | 5 | | allowed under subsection (1)(C) or (D) of this Section only
if | 6 | | the applicable requirements of
subsection (1)(G) (1)(E) have | 7 | | been
satisfied.
| 8 | | (A) Credit shall be allowed when the reinsurance is | 9 | | ceded to an assuming
insurer that is authorized in this | 10 | | State
to transact the types of insurance ceded and has at | 11 | | least $5,000,000 in
capital and surplus.
| 12 | | (B) Credit shall be allowed when the reinsurance is | 13 | | ceded to an assuming
insurer that is accredited as a | 14 | | reinsurer in this State. An accredited
reinsurer is one | 15 | | that:
| 16 | | (1) files with the Director evidence of its | 17 | | submission to this State's
jurisdiction;
| 18 | | (2) submits to this State's authority to examine | 19 | | its books and records;
| 20 | | (3) is licensed to transact insurance or | 21 | | reinsurance in at least one
state, or in the case of a | 22 | | U.S. branch of an alien assuming insurer is
entered | 23 | | through and licensed to transact insurance or | 24 | | reinsurance in at
least one state;
| 25 | | (4) files annually with the Director a copy of its | 26 | | annual statement
filed with the insurance department |
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| 1 | | of its state of domicile and a copy of
its most recent | 2 | | audited financial statement; and
| 3 | | (5) maintains a surplus as regards policyholders | 4 | | in an amount that is
not less than $20,000,000 and | 5 | | whose accreditation has been approved by the
Director. | 6 | | No credit shall be allowed a domestic ceding insurer, | 7 | | if the
assuming insurers' accreditation has been | 8 | | revoked by the Director after
notice and hearing.
| 9 | | (C)(1) Credit shall be allowed when the reinsurance is | 10 | | ceded to an assuming insurer that is domiciled in, or in | 11 | | the case of a U.S. branch of an alien assuming insurer is | 12 | | entered through, a state that employs standards regarding | 13 | | credit for reinsurance substantially similar to those | 14 | | applicable under this Act and the assuming insurer or U.S. | 15 | | branch of an alien assuming insurer: | 16 | | (a) maintains a surplus as regards policyholders | 17 | | in an amount not less than $20,000,000; and | 18 | | (b) submits to the authority of this State to | 19 | | examine its books and records. | 20 | | (2) The requirement of item (1) of this paragraph (C) | 21 | | does not apply to reinsurance ceded and assumed pursuant to | 22 | | pooling arrangements among insurers in the same holding | 23 | | company system.
| 24 | | (D) (C) (1) Credit shall be allowed when the reinsurance | 25 | | is ceded to
an assuming insurer that maintains a trust fund | 26 | | in a qualified United
States financial institution, as |
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| 1 | | defined in subsection 3(B), for the
payment of the valid | 2 | | claims of its United States policyholders and ceding
| 3 | | insurers, their assigns and successors in interest. The | 4 | | assuming insurer
shall report to the Director information | 5 | | substantially the same as
that required to be reported on | 6 | | the NAIC annual and quarterly financial
statement by | 7 | | authorized
insurers and any other financial information | 8 | | that the
Director deems necessary to determine the | 9 | | financial condition of the
assuming insurer and the | 10 | | sufficiency of the trust
fund.
The assuming insurer shall | 11 | | submit to examination of its books and records by
the | 12 | | Director and bear the expense of examination.
| 13 | | (2)(a) Credit for reinsurance shall not be granted | 14 | | under this subsection
unless the form of the trust and | 15 | | any amendments to the trust have been approved
by:
| 16 | | (i) the regulatory official of the state where | 17 | | the trust is domiciled;
or
| 18 | | (ii) the regulatory official of another state | 19 | | who, pursuant to the
terms of the trust instrument, | 20 | | has accepted principal regulatory oversight of
the | 21 | | trust.
| 22 | | (b) The form of the trust and any trust amendments | 23 | | also shall be filed
with the regulatory official of | 24 | | every state in which the ceding insurer
beneficiaries | 25 | | of the trust are domiciled. The trust instrument shall | 26 | | provide
that contested claims shall be valid and |
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| 1 | | enforceable upon the final order of
any court of | 2 | | competent jurisdiction in the United States. The trust | 3 | | shall vest
legal title to its assets in its trustees | 4 | | for the benefit of the assuming
insurer's United States | 5 | | policyholders and ceding insurees and their assigns
| 6 | | and
successors in interest. The trust and the assuming | 7 | | insurer shall be subject to
examination as determined | 8 | | by the Director.
| 9 | | (c) The trust shall remain in effect for as long as | 10 | | the assuming insurer
has outstanding obligations due | 11 | | under the reinsurance agreements subject to the
trust. | 12 | | No later than February 28 of each year the trustee of | 13 | | the trust shall
report to the
Director in writing the | 14 | | balance of the trust and a list of the trust's
| 15 | | investments at the preceding year-end and shall | 16 | | certify the date of termination
of
the trust, if so | 17 | | planned, or certify that the trust will not expire | 18 | | prior to
the next following December 31.
| 19 | | (3) The following requirements apply to the | 20 | | following categories of
assuming insurer:
| 21 | | (a) The trust fund for a single assuming | 22 | | insurer shall consist of
funds
in trust in an | 23 | | amount not less than the assuming insurer's | 24 | | liabilities
attributable to reinsurance ceded by | 25 | | U.S. ceding insurers, and
in
addition, the | 26 | | assuming insurer shall maintain a trusteed surplus |
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| 1 | | of not
less than $20,000,000 , except as provided in | 2 | | paragraph 3(b) of this subsection .
| 3 | | (b) At any time after the assuming insurer has | 4 | | permanently discontinued underwriting new business | 5 | | secured by the trust for at least 3 full years, the | 6 | | Director with principal regulatory oversight of | 7 | | the trust may authorize a reduction in the required | 8 | | trusteed surplus, but only after a finding, based | 9 | | on an assessment of the risk, that the new required | 10 | | surplus level is adequate for the protection of | 11 | | U.S. ceding insurers, policyholders, and claimants | 12 | | in light of reasonably foreseeable adverse loss | 13 | | development. The risk
assessment may involve an | 14 | | actuarial review, including an
independent | 15 | | analysis of reserves and cash flows, and shall | 16 | | consider all material risk factors, including when | 17 | | applicable, the lines of business involved, the | 18 | | stability of the incurred loss estimates and the | 19 | | effect of the surplus requirements on the assuming | 20 | | insurer's liquidity or solvency. The minimum | 21 | | required trusteed surplus may not be reduced to an | 22 | | amount less than 30% of the assuming insurer's | 23 | | liabilities attributable to reinsurance ceded by | 24 | | U.S. ceding
insurers.
| 25 | | (c) (b) (i) In the case of a group including | 26 | | incorporated and
individual unincorporated
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| 1 | | underwriters:
| 2 | | (I) for reinsurance ceded under | 3 | | reinsurance agreements with an
inception, | 4 | | amendment, or renewal date on or after August | 5 | | 1, 1995, the trust
shall consist of a trusteed | 6 | | account in an amount not less than the group's
| 7 | | several liabilities attributable to business | 8 | | ceded by U.S. domiciled ceding
insurers to any | 9 | | member of the group;
| 10 | | (II) for reinsurance ceded under | 11 | | reinsurance agreements with an
inception date | 12 | | on or before July 31, 1995 and not amended or | 13 | | renewed after
that date, notwithstanding the | 14 | | other provisions of this Act, the trust shall
| 15 | | consist of a trusteed account in an amount not | 16 | | less than the group's several
insurance and | 17 | | reinsurance liabilities attributable to | 18 | | business written in the
United States; and
| 19 | | (III) in addition to these trusts, the | 20 | | group shall maintain in trust
a
trusteed | 21 | | surplus of which not less than $100,000,000 | 22 | | shall be held jointly for
the benefit of the | 23 | | U.S. domiciled ceding insurers of any member of | 24 | | the group
for all years of account.
| 25 | | (ii) The incorporated members of the
group | 26 | | shall not be engaged in any business other than |
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| 1 | | underwriting as a member
of the group and shall be | 2 | | subject to the same level of solvency regulation | 3 | | and
control by the group's domiciliary regulator | 4 | | as are the unincorporated
members.
| 5 | | (iii) Within 90 days after its financial | 6 | | statements are due to be
filed
with the group's | 7 | | domiciliary regulator, the group shall provide to | 8 | | the Director
an annual certification by the | 9 | | group's domiciliary regulator of the solvency of
| 10 | | each underwriter member, or if a certification is | 11 | | unavailable, financial
statements prepared by | 12 | | independent public accountants of each underwriter
| 13 | | member of the group.
| 14 | | (d) (c) In the case of a group of incorporated | 15 | | insurers under
common
administration, the group | 16 | | shall:
| 17 | | (i) have continuously transacted an | 18 | | insurance business
outside the United States | 19 | | for at least 3 years immediately before making
| 20 | | application for accreditation;
| 21 | | (ii) maintain aggregate policyholders' | 22 | | surplus of
not less than $10,000,000,000;
| 23 | | (iii) maintain a trust in an amount not
| 24 | | less than
the group's
several liabilities | 25 | | attributable to business ceded by United | 26 | | States
domiciled ceding
insurers to any member |
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| 1 | | of the group pursuant to reinsurance contracts | 2 | | issued in
the name of the group;
| 3 | | (iv) in addition, maintain a joint | 4 | | trusteed
surplus
of which not less than | 5 | | $100,000,000 shall be held jointly for the | 6 | | benefit
of the United
States ceding insurers of | 7 | | any member of the group as additional security | 8 | | for
these liabilities; and
| 9 | | (v) within 90 days after its financial | 10 | | statements are due to be
filed
with the group's | 11 | | domiciliary regulator,
make available to the | 12 | | Director an annual certification of each | 13 | | underwriter
member's
solvency by the member's | 14 | | domiciliary regulator and financial statements | 15 | | of
each
underwriter member of the group | 16 | | prepared by its independent public
accountant.
| 17 | | (E) Credit shall be allowed when the reinsurance is | 18 | | ceded to an assuming insurer that is certified by the | 19 | | Director as a reinsurer in this State and secures its | 20 | | obligations in accordance with the requirements of this | 21 | | subsection. This subsection shall apply only to | 22 | | reinsurance contracts entered into or renewed on or after | 23 | | the effective date of this Act. | 24 | | (1) In order to be eligible for certification, the | 25 | | assuming insurer shall meet the following | 26 | | requirements: |
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| 1 | | (a) the assuming insurer must be domiciled and | 2 | | licensed to transact insurance or reinsurance in a | 3 | | qualified jurisdiction, as determined by the | 4 | | Director under paragraph (3) of this subsection; | 5 | | (b) the assuming insurer must maintain minimum | 6 | | capital and surplus in an amount to be determined | 7 | | by the Director pursuant to regulation; | 8 | | (c) the assuming insurer must maintain | 9 | | financial strength ratings from 2 or more rating | 10 | | agencies deemed acceptable by the Director | 11 | | pursuant to regulation; | 12 | | (d) the assuming insurer must agree to submit | 13 | | to the jurisdiction of any court of competent | 14 | | jurisdiction in any state of the United States, | 15 | | appoint the Director as its agent for service of | 16 | | process in this State, and provide security for | 17 | | 100% of the assuming insurer's liabilities | 18 | | attributable to reinsurance ceded by U.S. ceding | 19 | | insurers if it resists enforcement of a final U.S. | 20 | | judgment; | 21 | | (e) the assuming insurer must agree to meet | 22 | | applicable information filing requirements as | 23 | | determined by the Director, both with respect to an | 24 | | initial application for certification and on an | 25 | | ongoing basis; and | 26 | | (f) the assuming insurer must satisfy any |
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| 1 | | other requirements for certification deemed | 2 | | relevant by the Director. | 3 | | (2) An association including incorporated and | 4 | | individual unincorporated underwriters may be a | 5 | | certified reinsurer. In order to be eligible for | 6 | | certification, in addition to satisfying requirements | 7 | | of paragraph (1): | 8 | | (a) the association shall satisfy its minimum | 9 | | capital and surplus requirements through the | 10 | | capital and surplus equivalents (net of | 11 | | liabilities) of the association and its members, | 12 | | which shall include a joint central fund that may | 13 | | be applied to any unsatisfied obligation of the | 14 | | association or any of its members, in an amount | 15 | | determined by the Director to provide adequate | 16 | | protection; | 17 | | (b) the incorporated members of the | 18 | | association shall not be engaged in any business | 19 | | other than underwriting as a member of the | 20 | | association and shall be subject to the same level | 21 | | of regulation and solvency control by the | 22 | | association's domiciliary regulator as are the | 23 | | unincorporated members; and | 24 | | (c) within 90 days after its financial | 25 | | statements are due to be filed with the | 26 | | association's domiciliary regulator, the |
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| 1 | | association shall provide to the Director an | 2 | | annual certification by the association's | 3 | | domiciliary regulator of the solvency of each | 4 | | underwriter member; or if a certification is | 5 | | unavailable, financial statements, prepared by | 6 | | independent public accountants, of each | 7 | | underwriter
member of the association. | 8 | | (3) The Director shall create and publish a list of | 9 | | qualified jurisdictions, under which an assuming | 10 | | insurer licensed and domiciled in such jurisdiction is | 11 | | eligible to be considered for certification by the | 12 | | Director as a certified reinsurer. | 13 | | (a) In order to determine whether the | 14 | | domiciliary jurisdiction of a non-U.S. assuming | 15 | | insurer is eligible to be recognized as a qualified | 16 | | jurisdiction, the Director shall evaluate the | 17 | | appropriateness and effectiveness of the | 18 | | reinsurance supervisory system of the | 19 | | jurisdiction, both initially and on an ongoing | 20 | | basis, and consider the rights, benefits, and the | 21 | | extent of reciprocal recognition afforded by
the | 22 | | non-U.S. jurisdiction to reinsurers licensed and | 23 | | domiciled in the U.S. A qualified jurisdiction | 24 | | must agree to share information and cooperate with | 25 | | the Director with respect to all certified | 26 | | reinsurers doing business within the jurisdiction. |
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| 1 | | A jurisdiction may not be recognized as a qualified | 2 | | jurisdiction if the Director has determined that | 3 | | the jurisdiction does not adequately and promptly
| 4 | | enforce final U.S. judgments and arbitration | 5 | | awards. Additional factors may be considered in | 6 | | the discretion of the Director. | 7 | | (b) If the NAIC publishes a list of qualified | 8 | | jurisdictions, the Director may defer to this | 9 | | list. | 10 | | (c) U.S. jurisdictions that meet the | 11 | | requirement for accreditation under the NAIC | 12 | | financial standards and accreditation program | 13 | | shall be recognized as qualified jurisdictions. | 14 | | (d) If a certified reinsurer's domiciliary | 15 | | jurisdiction ceases to be a qualified | 16 | | jurisdiction, the Director has the discretion to | 17 | | suspend the reinsurer's certification | 18 | | indefinitely, in lieu of revocation. | 19 | | (4) The Director shall assign a rating to each | 20 | | certified reinsurer, giving due consideration to the | 21 | | financial strength ratings that have been assigned by | 22 | | rating agencies recognized by the Director pursuant to | 23 | | regulation, provided that the Director shall consider | 24 | | only financial strength ratings that are based on | 25 | | interactive communication between the rating agency | 26 | | and the assuming insurer and not solely on publicly |
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| 1 | | available information. The
Director shall publish a | 2 | | list of all certified reinsurers and their ratings. | 3 | | (5) A certified reinsurer shall secure obligations | 4 | | assumed from U.S. ceding insurers under this | 5 | | subsection at a level consistent with its rating, as | 6 | | specified in regulations adopted by the Director. | 7 | | (a) In order for a domestic ceding insurer to | 8 | | qualify for full financial statement credit for | 9 | | reinsurance ceded to a certified reinsurer, the | 10 | | certified reinsurer shall maintain security in a | 11 | | form acceptable to the Director and consistent | 12 | | with the provisions of Section 3 of this Act, or in | 13 | | a
multibeneficiary trust in accordance with | 14 | | subsection (D) of this Section, except as | 15 | | otherwise provided in this subsection. | 16 | | (b) If a certified reinsurer maintains a trust | 17 | | to secure its obligations subject to subsection | 18 | | (D) of this Section, the certified reinsurer shall | 19 | | maintain separate trust accounts for its | 20 | | obligations incurred under reinsurance agreements | 21 | | issued or renewed as a certified reinsurer with | 22 | | reduced security as permitted by this subsection | 23 | | or comparable
laws of other U.S. jurisdictions and | 24 | | for its obligations subject to subsection (D) of | 25 | | this Section. Each trust account shall be | 26 | | secondarily obligated to secure all obligations |
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| 1 | | secured by the other account, including the | 2 | | assuming insurer's obligation to fund any | 3 | | deficiency, but only after its own primary | 4 | | obligations have been fully discharged. | 5 | | (c) The minimum trusteed surplus requirements | 6 | | provided in subsection (D) are not applicable with | 7 | | respect to a multibeneficiary trust maintained by | 8 | | a certified reinsurer for the purpose of securing | 9 | | obligations incurred under this subsection. | 10 | | (d) With respect to obligations incurred by a | 11 | | certified reinsurer under this subsection, if the | 12 | | security is insufficient, the Director shall | 13 | | reduce the allowable credit by an amount | 14 | | proportionate to the deficiency, and has the | 15 | | discretion to impose further reductions in | 16 | | allowable credit upon finding that there is a | 17 | | material risk that the
certified reinsurer's | 18 | | obligations shall not be paid in full when due. | 19 | | (e) For purposes of this subsection, a | 20 | | certified reinsurer whose certification has been | 21 | | terminated for any reason shall be treated as a | 22 | | certified reinsurer required to secure 100% of its | 23 | | obligations. This subparagraph does not apply to a | 24 | | certified reinsurer in inactive status or to a | 25 | | reinsurer whose certification has been suspended, | 26 | | even if the Director assigns a higher rating to |
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| 1 | | such reinsurer. | 2 | | (6) If an applicant for certification has been | 3 | | certified as a reinsurer in an NAIC accredited | 4 | | jurisdiction, the Director has the discretion to defer | 5 | | to that jurisdiction's certification, and has the | 6 | | discretion to defer to the rating assigned by that | 7 | | jurisdiction, and such assuming insurer shall be | 8 | | considered to be a certified reinsurer in this State. | 9 | | (7) A certified reinsurer that ceases to assume new | 10 | | business in this State may request to maintain its | 11 | | certification in inactive status in order to continue | 12 | | to qualify for a reduction in security for its in-force | 13 | | business. An inactive
certified reinsurer shall | 14 | | continue to comply with all applicable requirements of | 15 | | this subsection, and the Director shall assign a rating | 16 | | that takes into
account, if relevant, the reasons why | 17 | | the reinsurer is not assuming new business.
| 18 | | (F) (D) Credit shall be allowed when the reinsurance is | 19 | | ceded to an assuming
insurer not meeting the requirements | 20 | | of subsection (1) (A), (B), or (C) , (D), or (E)
but only | 21 | | with respect to the insurance of risks located in | 22 | | jurisdictions
where that reinsurance is required by | 23 | | applicable law or regulation of that
jurisdiction.
| 24 | | (G) (E) If the assuming insurer is not licensed , | 25 | | accredited, or certified to transact insurance or | 26 | | reinsurance in
this State or an accredited reinsurer in |
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| 1 | | this State , the credit permitted
by subsections subsection | 2 | | (1)(C) and (D) shall not be allowed unless the assuming | 3 | | insurer
agrees in the reinsurance agreements:
| 4 | | (1) that in the event of the failure of the | 5 | | assuming insurer to perform
its obligations under the | 6 | | terms of the reinsurance agreement, the assuming
| 7 | | insurer, at the request of the ceding insurer, shall | 8 | | submit to the
jurisdiction of any court of competent | 9 | | jurisdiction in any state of the
United States, will | 10 | | comply with all requirements necessary to give the
| 11 | | court jurisdiction, and will abide by the final | 12 | | decision of the court or of
any appellate court in the | 13 | | event of an appeal; and
| 14 | | (2) to designate the Director or a designated | 15 | | attorney as its true and
lawful attorney upon whom may | 16 | | be served any lawful process in any action,
suit, or | 17 | | proceeding instituted by or on behalf of the ceding | 18 | | company.
| 19 | | This provision is not intended to conflict with or | 20 | | override the
obligation of the parties to a reinsurance | 21 | | agreement to arbitrate their
disputes, if an obligation to | 22 | | arbitrate is created in the agreement.
| 23 | | (H) (F) If the assuming insurer does not meet the | 24 | | requirements of
subsection (1)(A) , or (B) , or (C) , the | 25 | | credit permitted by subsection (1) (D) or (E) (C) shall not
| 26 | | be allowed unless the assuming insurer agrees in the trust |
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| 1 | | agreements to the
following conditions:
| 2 | | (1) Notwithstanding any other provisions in the | 3 | | trust instrument, if the
trust fund is inadequate | 4 | | because it contains an amount less than the amount
| 5 | | required by subsection (D) (C) (3) of this Section or if | 6 | | the grantor of the trust
has been declared insolvent or | 7 | | placed into receivership, rehabilitation,
liquidation, | 8 | | or similar proceedings under the laws of its state or | 9 | | country of
domicile, the trustee shall comply with an | 10 | | order of the state official with
regulatory oversight | 11 | | over the trust or with an order of a court of competent
| 12 | | jurisdiction directing the trustee to transfer to the | 13 | | state official with
regulatory oversight all of the | 14 | | assets of the trust fund.
| 15 | | (2) The assets shall be distributed by and claims | 16 | | shall be filed with
and valued by the state official | 17 | | with regulatory oversight in accordance with
the laws | 18 | | of the state in which the trust is domiciled that are | 19 | | applicable to
the liquidation of domestic insurance | 20 | | companies.
| 21 | | (3) If the state official with regulatory | 22 | | oversight determines that the
assets of the trust fund | 23 | | or any part thereof
are not necessary to satisfy the | 24 | | claims of the U.S. ceding insurers of the
grantor of | 25 | | the trust, the assets or part thereof shall be returned | 26 | | by the state
official with regulatory oversight to the |
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| 1 | | trustee for distribution in
accordance with the trust | 2 | | agreement.
| 3 | | (4) The grantor shall waive any rights otherwise | 4 | | available to it under
U.S. law that are inconsistent | 5 | | with the provision.
| 6 | | (I) If an accredited or certified reinsurer ceases to | 7 | | meet the requirements for accreditation or certification, | 8 | | the Director may suspend or revoke the reinsurer's | 9 | | accreditation or certification. | 10 | | The Director must give the reinsurer notice and | 11 | | opportunity for hearing. The suspension or revocation may | 12 | | not take effect until after the Director's order on | 13 | | hearing, unless: | 14 | | (1) the reinsurer waives its right to hearing; | 15 | | (2) the Director's order is based on regulatory | 16 | | action by the reinsurer's domiciliary jurisdiction or | 17 | | United States port of entry, or the voluntary surrender | 18 | | or termination of the reinsurer's eligibility to | 19 | | transact insurance or reinsurance business in its | 20 | | domiciliary jurisdiction or in its United States port | 21 | | of entry; or | 22 | | (3) the Director finds that an emergency requires | 23 | | immediate action and a court of competent jurisdiction | 24 | | has not stayed the Director's action. | 25 | | While a reinsurer's accreditation or certification is | 26 | | suspended, no reinsurance contract issued or renewed after |
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| 1 | | the effective date of the suspension qualifies for credit | 2 | | except to the extent that the reinsurer's obligations under | 3 | | the contract are secured in accordance with Section 3 of | 4 | | this Act. If a reinsurer's accreditation or certification | 5 | | is revoked, no credit for reinsurance may be granted after | 6 | | the effective date of the revocation except to the extent | 7 | | that the
reinsurer's obligations under the contract are | 8 | | secured in accordance with paragraph (E)(5) or Section 3 of | 9 | | this Act. | 10 | | (2) Credit for the reinsurance ceded by a
domestic
insurer | 11 | | to an assuming insurer not meeting the requirements of | 12 | | subsection
(1) shall be allowed in an amount not exceeding the | 13 | | assets or liabilities
carried by
the ceding insurer. The credit | 14 | | shall not exceed the amount of funds held
by or held in trust | 15 | | for the ceding insurer under a reinsurance contract with the | 16 | | assuming insurer
as security for the payment of obligations | 17 | | thereunder, if the security is
held in the United States | 18 | | subject to withdrawal solely by, and under the
exclusive | 19 | | control of, the ceding insurer; or, in the case of a trust, | 20 | | held
in a qualified United States financial institution, as | 21 | | defined in
subsection (3)(B). This security may be in the form | 22 | | of:
| 23 | | (A) Cash.
| 24 | | (B) Securities listed by the Securities Valuation | 25 | | Office of the National
Association of Insurance | 26 | | Commissioners that conform to the requirements
of Article |
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| 1 | | VIII of this Code that are not issued by an affiliate of | 2 | | either
the assuming or ceding company.
| 3 | | (C) Clean, irrevocable, unconditional, letters of | 4 | | credit issued or
confirmed by a qualified United States | 5 | | financial institution, as defined in
subsection (3)(A). | 6 | | The letters of credit shall be effective no
later than | 7 | | December 31 of the year for which filing is being
made, and | 8 | | in the possession of, or in trust for, the ceding company | 9 | | on or
before the filing date of its annual statement. | 10 | | Letters of credit meeting
applicable standards of issuer | 11 | | acceptability as of the dates of their
issuance (or | 12 | | confirmation) shall, notwithstanding the issuing (or
| 13 | | confirming) institution's subsequent failure to meet | 14 | | applicable standards
of issuer acceptability, continue to | 15 | | be acceptable as security until their
expiration, | 16 | | extension, renewal, modification, or amendment, whichever | 17 | | first
occurs.
| 18 | | (D) Any other form of security acceptable to the | 19 | | Director.
| 20 | | (3)(A) For purposes of subsection 2(C), a "qualified United | 21 | | States
financial institution" means an institution that:
| 22 | | (1) is organized or, in the case of a U.S. office | 23 | | of a foreign
banking organization, licensed under the | 24 | | laws of the United States or
any state thereof;
| 25 | | (2) is regulated, supervised, and examined by U.S. | 26 | | federal or state
authorities having regulatory |
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| 1 | | authority over banks and trust companies;
| 2 | | (3) has been designated by either the Director or | 3 | | the Securities
Valuation Office of the
National | 4 | | Association of Insurance Commissioners as meeting such
| 5 | | standards of financial condition and standing as are | 6 | | considered necessary and
appropriate to regulate the | 7 | | quality of financial institutions whose letters of
| 8 | | credit will be acceptable to the Director; and
| 9 | | (4) is not affiliated with the assuming company.
| 10 | | (B) A "qualified United States financial institution" | 11 | | means, for
purposes of those provisions of this law | 12 | | specifying those institutions that
are eligible to act as a | 13 | | fiduciary of a trust, an institution that:
| 14 | | (1) is organized or, in the case of the U.S. branch | 15 | | or agency office of
a foreign banking organization, | 16 | | licensed under the laws of the United States or
any | 17 | | state thereof and has been granted authority to operate | 18 | | with fiduciary
powers;
| 19 | | (2) is regulated, supervised, and examined by | 20 | | federal or state
authorities having regulatory | 21 | | authority over banks and trust companies; and
| 22 | | (3) is not affiliated with the assuming company, | 23 | | however, if the
subject of the reinsurance contract is | 24 | | insurance written pursuant to
Section 155.51 of this | 25 | | Code, the financial institution may be affiliated
with | 26 | | the assuming company with the prior approval of the |
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| 1 | | Director.
| 2 | | (Source: P.A. 90-381, eff. 8-14-97.)".
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