Register February 2013 No. 686
Chapter Ins 52
CREDIT FOR REINSURANCE
Ins 52.02 Credit allowed a licensed ceding insurer.
Ins 52.025 Revocation of accreditation.
Ins 52.03 Insolvency clause and jurisdiction; financial reinsurance disallowed.
Ins 52.04 Reduction from liability for reinsurance ceded by a licensed insurer to an assuming insurer.
Ins 52.05 Trust agreements qualifying for security.
Ins 52.06 Letters of credit.
Ins 52.01
Ins 52.01
Definitions. In this chapter, unless the context otherwise requires:
Ins 52.01(1)
(1) "Policyholder surplus" means capital and surplus.
Ins 52.01(2)
(2) "Qualified United States financial institution" means an institution that:
Ins 52.01(2)(a)
(a) Is organized or, in the case of a United States office of a foreign banking organization, licensed, under the laws of the United States or any state;
Ins 52.01(2)(b)
(b) Is regulated, supervised and examined by United States federal or state authorities having regulatory authority over banks and trust companies; and
Ins 52.01(2)(c)
(c) Has been determined by either the commissioner or equivalent official of the ceding insurer's state of domicile, 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 or equivalent official.
Ins 52.01(3)
(3) "Qualified fiduciary United States financial institution" means an institution that:
Ins 52.01(3)(a)
(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 any state; and
Ins 52.01(3)(b)
(b) Is regulated, supervised and examined by United States federal or state authorities having regulatory authority over banks and trust companies.
Ins 52.01 History
History: Cr.
Register, July, 1993, No. 451, eff. 8-1-93.
Ins 52.02
Ins 52.02
Credit allowed a licensed ceding insurer. Except as provided by
s. Ins 52.04 and unless otherwise prohibited by the commissioner, a licensed insurer may take credit for ceded reinsurance as either an asset or a deduction from liability only if the reinsurer at all times complies with one or more of the following:
Ins 52.02(1)
(1) The reinsurer is licensed as an insurer in this state.
Ins 52.02(2)
(2) The reinsurer is accredited in this state by the commissioner at the time credit is claimed or taken and the reinsurer:
Ins 52.02(2)(a)
(a) Files with the commissioner evidence of its submission to this state's jurisdiction;
Ins 52.02(2)(b)
(b) Submits to this state's authority to examine its books and records;
Ins 52.02(2)(c)
(c) Files a properly executed Form AR-1 as evidence of its submission to this state's jurisdiction and to this state's authority to examine its books and records;
Ins 52.02(2)(d)
(d) 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 is entered through and licensed to transact insurance or reinsurance in at least one state;
Ins 52.02(2)(e)
(e) Files with the commissioner a certified copy of a letter or a certificate of authority or of compliance as evidence that it is licensed to transact insurance or reinsurance, or, in the case of a United States branch of an alien assuming insurer, is entered through and licensed to transact insurance or reinsurance, as required under
par. (d);
Ins 52.02(2)(f)
(f) Files annually with the commissioner by March 1, or a later date approved in writing by the commissioner, a copy of its annual statement filed with the insurance department of its state of domicile or, in the case of an alien assuming insurer, with the state through which it is entered and in which it is licensed to transact insurance or reinsurance, and a copy of its most recent audited financial statement annually by June 1; and
Ins 52.02(2)(g)
(g) Unless otherwise specifically approved in writing by the commissioner, maintains policyholder surplus in an amount which is not less than $3,000,000.
Ins 52.02(3)
(3) The reinsurer is domiciled and licensed in, or in the case of a United States branch of an alien assuming insurer is entered through, a state which employs standards regarding credit for reinsurance which the commissioner determines equal or exceed the standards applicable under this chapter and the reinsurer or Unites States branch of an alien reinsurer:
Ins 52.02(3)(a)
(a) Submits to the authority of this state to examine its books and records;
Ins 52.02(3)(c)1.
1. The reinsurer or United States branch assumes the reinsurance under pooling arrangements among insurers in the same holding company system; or
Ins 52.02(3)(c)2.
2. The reinsurer maintains policyholder surplus in an amount not less than $20,000,000.
Ins 52.02(3m)
(3m) The ceding insurer is an alien insurer or nondomestic insurer and the laws of the state of the ceding alien or nondomestic insurer's domicile or entry permit the alien or nondomestic insurer to take credit for the reinsurance. Unless credit is taken under provisions which are substantially similar to
sub. (4) or
(5) or
s. Ins 52.04, credit may be taken under this subsection only if the reinsurer has at least $3,000,000 in policyholder surplus. The commissioner may prohibit a licensed alien or nondomestic insurer from taking credit under this subsection.
Ins 52.02(4)
(4) The reinsurer complies with all of the following:
Ins 52.02(4)(a)
(a) The reinsurer maintains a trust fund in a qualified fiduciary United States financial institution for the payment of the valid claims of its United States policyholders and ceding insurers, their assigns and successors in interest.
Ins 52.02(4)(b)
(b) The reinsurer reports annually, by March 1, or a later date which the commissioner approves in writing, to the commissioner 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 commissioner to determine the sufficiency of the trust fund.
Ins 52.02(4)(c)
(c) The reinsurer maintains in a trust account funds equal to an amount that is not less than the assuming insurer's liabilities attributable to business written in the United States and, in addition, the reinsurer maintains a trusteed surplus of not less than $20,000,000.
Ins 52.02(4)(d)
(d) If the reinsurers are a group including incorporated and individual unincorporated underwriters, the reinsurers maintain in a trusteed account funds equal to an amount that is not less than the group's aggregate liabilities attributable to business written in the United States and, in addition, the group maintains 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; the incorporated members of the group are not 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; and the group makes available to the commissioner or equivalent official of the ceding licensed insurer's state of domicile or entry an annual certification of the solvency of each underwriter by the group's domiciliary regulator and its independent public accountants. For a domestic insurer, the certification shall be filed with the commissioner by June 1 unless otherwise approved in writing by the commissioner.
Ins 52.02(4)(e)
(e) The trust is established in a form approved by the commissioner or equivalent official of the ceding licensed insurer's state of domicile or entry. The trust instrument shall provide, and the trustees comply with, all of the following:
Ins 52.02(4)(e)1.
1. Contested claims shall be valid and enforceable out of funds in the trust if the claims remain unsatisfied 30 days after the entry of a final order of any court of competent jurisdiction in the United States.
Ins 52.02(4)(e)2.
2. Legal title to the assets of the trust is vested in the trustee of the trust for the benefit of the grantor's United States policyholders and ceding insurers, their assigns and successors in interest.
Ins 52.02(4)(e)3.
3. The trust and the assuming insurer are subject to examination as determined by the commissioner.
Ins 52.02(4)(e)4.
4. The trust shall remain in effect for as long as the assuming insurer, or any member or former member of a group of insurers, has outstanding obligations due under the reinsurance agreements subject to the trust.
Ins 52.02(4)(e)5.
5. No later than February 28 of each year, unless a later date is approved in writing by the commissioner or equivalent official of the ceding licensed insurer's state of domicile or entry, the trustees of the trust shall report to the commissioner or equivalent official of the ceding licensed insurer's state of domicile or entry in writing setting forth the balance in 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 31.
Ins 52.02(4)(e)6.
6. No amendment to the trust may be effective unless reviewed and approved in writing and in advance by the commissioner or equivalent official of the ceding licensed insurer's state of domicile or entry.
Ins 52.02(5)
(5) The reinsurance ceded to the reinsurer is with respect to the insurance of risks located in jurisdictions where the reinsurance by the reinsurer is required by applicable law or regulation of that jurisdiction. For the purpose of this subsection "jurisdiction" means a state, district or territory of the United States or any lawful national government.
Ins 52.02 History
History: Cr.
Register, July, 1993, No. 451, eff. 8-1-93; am. (4) (d),
Register, December, 1995, No. 480, eff. 1-1-96.
Ins 52.025
Ins 52.025
Revocation of accreditation. Ins 52.025(1)
(1) The commissioner may revoke the accreditation of a reinsurer under
s. Ins 52.02. If the accreditation of a reinsurer is revoked, a licensed insurer may not take credit for ceded reinsurance to the reinsurer under
s. Ins 52.02 (2),
(3) or
(3m), regardless of when the reinsurance was ceded or the reinsurance contract executed. If a reinsurer does not comply with any provision of
s. Ins 52.02 (2),
(3),
(3m),
(4) or
(5) an insurer may not take credit for reinsurance ceded to the reinsurer under
s. Ins 52.02 (2),
(3),
(3m),
(4) or
(5), regardless of whether the reinsurer is or remains accredited and regardless of when the reinsurance was ceded or the reinsurance contract executed.
Ins 52.025(2)
(2) For the purpose of accreditation under
s. Ins 52.02 (2) or an order disallowing credit under
s. Ins 52.02 (3m), it is presumed that a reinsurer should not be accredited or take credit if the reinsurer has a policyholder surplus of less than $20,000,000.
Ins 52.025 History
History: Cr.
Register, July, 1993, No. 451, eff. 8-1-93.
Ins 52.03
Ins 52.03
Insolvency clause and jurisdiction; financial reinsurance disallowed. Ins 52.03(1)
(1) Except as permitted by
s. Ins 52.02 (5), a ceding domestic insurer may take credit for reinsurance ceded to a reinsurer which does not comply with
s. Ins 52.02 (1),
(2),
(3) and
(4) only if the reinsurer in a written reinsurance agreement does all of the following:
Ins 52.03(1)(a)
(a) Agrees that if the reinsurer fails to perform its obligations under the terms of the reinsurance agreement, the reinsurer, 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 the court jurisdiction, and will abide by the final decision of such court or of any appellate court in the event of an appeal.
Ins 52.03(1)(b)
(b) Designates the commissioner or a designated attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the ceding insurer.
Ins 52.03(2)
(2) Subsection (1) (a) and
(b) do not affect or supersede the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if the obligation is created in the agreement and complies with
ch. 645, Stats.
Ins 52.03(2m)
(2m) Except as permitted by
s. Ins 52.02 (5), a ceding domestic insurer may take credit for reinsurance under a reinsurance agreement effective on or after January 1, 1980, only if the agreement provides that the reinsurer assumes all credit risks of an intermediary relating to payments to an intermediary if the agreement by its terms requires payment to an intermediary.
Ins 52.03(3)
(3) A ceding domestic insurer may not take credit for reinsurance unless the assuming insurer in the reinsurance contract:
Ins 52.03(3)(a)
(a) Undertakes to protect the ceding insurer from loss or liability on coverage the ceding insurer issues not only in form but in fact; and
Ins 52.03(3)(b)
(b) Includes a proper insolvency clause under s.
645.58 (1), Stats., or for an alien or nondomestic insurer includes an insolvency clause which guarantees payment of the liability of the reinsurer without diminution because of the insolvency of the ceding insurer.
Ins 52.03(4)
(4) A ceding domestic insurer may take credit for reinsurance ceded only to the extent the ceding insurer has established adequate gross reserves on the business ceded.
Ins 52.03(5)
(5) A ceding domestic insurer may not take credit for reinsurance ceded in excess of the amount of the gross reserves carried on the business, or portion of the business, ceded.
Ins 52.03 History
History: Cr.
Register, July, 1993, No. 451, eff. 8-1-93; am. (1) (intro.), (b) and (2), renum. (1) (c) to be (2m) and am., cr. (4) and (5),
Register, December, 1995, No. 480, eff. 1-1-96.
Ins 52.04
Ins 52.04
Reduction from liability for reinsurance ceded by a licensed insurer to an assuming insurer. Unless otherwise ordered by the commissioner, an insurer may take credit for a reduction in liability for reinsurance ceded to a reinsurer even if the credit is not permitted under
s. Ins 52.02 in an amount not exceeding the lesser of the liabilities carried by the ceding insurer or the amount of funds held by or on behalf of the ceding insurer, but only if the funds are held in the United States and are security for the payment of obligations under the reinsurance contract and if the funds meet one of the following:
Ins 52.04(1)
(1) Are included under a security arrangement and are subject to withdrawal solely by, and are under the exclusive control of, the ceding insurer, and the form of the funds and the security agreement are approved by the commissioner or the equivalent official of the state of domicile or entry of the ceding insurer.
Ins 52.04(2)
(2) Are unencumbered, are securities listed by the securities valuation office of the national association of insurance commissioners and qualifying as admitted assets or cash, are withheld by the ceding insurer, and are subject to withdrawal solely by, and are under the exclusive control of, the ceding insurer;
Ins 52.04(3)
(3) Are securities listed by the securities valuation office of the national association of insurance commissioners and qualifying as admitted assets or cash, are held in a trust for the exclusive benefit of the ceding insurer and the ceding insurer, reinsurer, reinsurance contract and trust comply with
s. Ins 52.05; or
Ins 52.04(4)
(4) Are available under a clean, irrevocable, unconditional and evergreen letter of credit which is issued or confirmed by a qualified United States institution and are subject to withdrawal solely by, and are under the exclusive control of, the ceding insurer and the letter of credit is in the possession of the ceding insurer and the ceding insurer, reinsurer and letter of credit comply with
s. Ins 52.06. A letter of credit meeting applicable standards of issuer acceptability as of the date of issue or confirmation continues to meet those standards for the purpose of this subsection if after issuance or confirmation the financial institution fails to meet applicable standards of issuer acceptability. The letter of credit continues to be acceptable as funds until its expiration, extension, renewal, modification or amendment, whichever first occurs.
Ins 52.04 History
History: Cr.
Register, July, 1993, No. 451, eff. 8-1-93.
Ins 52.05
Ins 52.05
Trust agreements qualifying for security. Ins 52.05(1)(a)
(a) "Beneficiary" means the person for whose sole benefit the trust has been established and any successor of the beneficiary by operation of law, including, but not limited to, any liquidator, rehabilitator, receiver, or conservator.
Ins 52.05(1)(b)
(b) "Grantor" means the person that has established a trust, including, but not limited to, an unlicensed, unaccredited assuming insurer that establishes a trust.
Ins 52.05(1)(c)1.
1. Reinsured losses and allocated loss expenses paid by the ceding insurer, but not recovered from the assuming insurer;
