CHAPTER 58
FORMERLY
HOUSE BILL NO. 217
AN ACT TO AMEND SUBCHAPTER III OF CHAPTER 9 OF TITLE 18 OF THE DELAWARE CODE RELATING TO REINSURANCE.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:
Section 1. Amend Section 910, Title 18 of the Delaware Code by deleting said section in its entirety and replacing it with the following:
1910. Reinsurance.
Any authorized insurer may reinsure all or any part of an individual risk or of a particular class of risks in any other insurer, or accept such reinsurance from any other insurer, and, with the Commissioner's consent, may reinsure all of its risks in any other authorized insurer or reinsure all of the risks of any other insurer."
Section 2. Amend Subchapter III of Chapter 9 of Title 18 of the Delaware Code by adding a new Section 911 as follows:
1911. Credit allowed a domestic ceding insurer.
Credit for reinsurance shall 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 subsections (a) or (b) or (c) or
(d) or (e) of this section. If meeting the requirements of subsections (c) or (d) of this section, the requirements of subsection (f) of this section must also be met.
(a) Credit shall be allowed when the reinsurance is ceded to an assuming insurer which is licensed to transact insurance or reinsurance in this State.
(b) Credit shall 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:
(1) Files with the Commissioner evidence of its submission to this State;s jurisdiction;
(2) Submits to this State's authority to examine its books and records;
(3) Is licensed to transact insurance or reinsurance in at least one state, or in the case of a U.S. branch of an alien assuming insurer is entered through and licensed to transact insurance and reinsurance in at least one state;
(4) 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
(a) Maintains a surplus as regards policyholders in an amount which is not less than $20,000,000 and whose accreditation has not been denied by the Commissioner within 90 days of its submission; or
(b) Maintains a surplus as regards policyholders in an amount less than $20,000,000 and whose accreditation has been approved by the Commissioner.
No credit shall be allowed a domestic ceding insurer if the assuming insurer's accreditation has been revoked by the Commissioner after notice and hearing.
(c) Credit shall be allowed when the reinsurance is ceded to an assuming insurer which is domiciled and licensed in, or in the case of a U.S. 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 U.S. branch of an alien assuming insurer:
(1) Maintains a surplus as regards policyholders in an amount not less that $20,000,000; and
(2) Submits to the authority of this State to examine its books and records.
Provided, however, that the requirement of subsection (c)(1) of this section does not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system.
(d)(1) Credit shall 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 §913(b) of this title, exclusively for the payment of the valid claims of its United State 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 NAIC 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 shall consist of a trusteed account representing the assuming insurer's liabilities attributable to business written in the United State and, in addition, the assuming insurer shall maintain a trusteed surplus of not less than $20,000,000. In the case of a group of individual unincorporated underwriters, the trust shall 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 $100,000,000 shall be held jointly for the benefit of United States ceding insurers of any member of the group; and the group shall make available to the Commissioner an annual certification of the solvency of each underwriter by the group's domiciliary regulator and its independent public accountant.
(2) In the case of a group of incorporated insurers under common
administration which complies with the filing requirements contained in the previous paragraph, and which has continuously transacted an insurance business outside the United States for at least 3 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 $10,000,000,000, the trust shall be in 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 $100,000,000 shall be held jointly for the benefit of United States ceding insurers of any member of the group as additional security for any such liabilities, and 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 its independent public accountant.
(1) Such trust shall be established in a form approved by the
Commissioner. The trust instrument shall provide that contested claims shall be 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 shall be subject to examination as determined by the Commissioner. The trust described herein must remain in effect for as long as the assuming insurer shall have outstanding obligations due under the reinsurance agreements subject to the trust.
(2) No later than February 28th 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 year end and shall certify the date of termination of the trust, if so planned, or certify that the trust shall not expire prior to the next following December 31st.
(e) Credit shall be allowed when the reinsurance is ceded to an assuming insurer not meeting the requirements of subsections (a), (b), (c) or (d) of this section but only with respect to the insurance of risks located in jurisdictions where such reinsurance is required by applicable law or regulation of that jurisdiction.
(f) If the assuming insurer is not licensed or accredited to transact
insurance or reinsurance in this State, the credit permitted by subsections (c) and
(d)
of this section shall 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 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
(2) 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."
Section 3. Amend Subchapter III of Chapter 9 of Title 18 of the Delaware Code by adding a new §912 as follows:
"§912. 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 §911 of this title shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer and such reduction shall 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 such assuming insurer as security for the payment of obligations thereunder, if such 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 §913(b) of this title. This security may be in the form of:
(a) Securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners and qualifying as admitted assets;
(a) Clean, irrevocable, unconditional letters of credit, issued or
confirmed by a qualified United States institution, as defined in §913(a) of this title, no later than December 31st in respect of the year for which filing is being made, and in the possession of 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) 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 first occurs;
(b) Any other form of security acceptable to the Commissioner."
Section 4. Amend Subchapter III of Chapter 9 of Title 18 of the Delaware Code by adding a new §913 as follows:
"§913. Qualified United States financial institutions.
(a) For purposes of §912(c) of this title, a 'qualified United States financial institution' means an institution that:
(1) Is organized or (in the case of a U.S. office of a foreign
banking organization) licensed under the laws of the United States or any state thereof;
(2) Is regulated, supervised and examined by U.S. federal or state authorities having regulatory authority over banks and trust companies; and
(3) 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.
(b) A 'qualified United States financial institution' means, for purposes of those provisions of this law specifying those institutions that are eligible to act as a fiduciary of a trust, an institution that
(1) Is organized or (in the case of a U.S. branch or agency office of a foreign banking organization) licensed under the laws of the United States or any state thereof and has been granted authority to operate with fiduciary powers; and
(1) Is regulated, supervised and examined by federal or state
authorities having regulatory authority over banks and trust companies."
Section 5. Amend Subchapter III of Chapter 9 of Title 18 of the Delaware Code by adding a new §914 as follows:
"§914. Additional requirements.
(a) Notwithstanding any other provision of §§911 or 912 of this title, no credit shall be allowed unless the reinsurance agreement provides that, in the event of insolvency of the ceding insurer, reinsurance proceeds will be paid to the ceding insurer or the liquidator on the basis of the amount of claim allowed in the insolvency proceeding without diminution by reason of the inability of the ceding insurer to pay all or any part of the claim.
(b) Upon request of the Commissioner an insurer shall promptly inform the Commissioner in writing of the cancellation or any other material change of any of its reinsurance treaties or arrangements."
Section 6. Amend Subchapter III of Chapter 9 of Title 18 of the Delaware Code by adding a new §915 as follows:
"§915. Rules and regulations.
The Commissioner may adopt rules and regulations implementing this Subchapter."
Section 7. Sections 2 and 3 of this Act shall apply to all cessions after January 1, 1992 under reinsurance agreements which have had an inception, anniversary, or renewal date after January 1, 1992.