Chapter Ins 52

Ins 52.02(4r) (4r) The reinsurance is ceded to an assuming insurer that has been recognized by the commissioner as a reinsurer in a reciprocal jurisdiction, in accordance with pars. (a) to (h).

Ins 52.02(4r)(a) (a) Credit shall be allowed when the reinsurance is ceded from an insurer domiciled in this state to an assuming insurer meeting each of the conditions set forth below.

Ins 52.02(4r)(a)1. 1. The assuming insurer shall be licensed to transact reinsurance by, and have its head office or be domiciled in, a reciprocal jurisdiction.

Ins 52.02(4r)(a)2. 2. The assuming insurer shall have and maintain on an ongoing basis minimum capital and surplus, or its equivalent, calculated on at least an annual basis as of the preceding December 31 or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, and confirmed as set forth in subd. 7., according to the methodology of its domiciliary jurisdiction, in the following amounts:

Ins 52.02(4r)(a)2.a. a. No less than $250,000,000; or

Ins 52.02(4r)(a)2.b. b. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, the minimum capital and surplus equivalents, net of liabilities, or own funds of the equivalent of at least $250,000,000, and, a central fund containing a balance of the equivalent of at least $250,000,000.

Ins 52.02(4r)(a)3. 3. The assuming insurer shall have and maintain on an ongoing basis, a minimum solvency or capital ratio, as applicable, as set forth in subd. 3. a. to c. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it must meet the applicable requirement in the reciprocal jurisdiction where the assuming insurer has its head office or is domiciled, as applicable, and is also licensed:

Ins 52.02(4r)(a)3.a. a. If the assuming insurer has its head office or is domiciled in a reciprocal jurisdiction as defined in s. Ins 52.01 (4) (a), the ratio specified in the applicable covered agreement;

Ins 52.02(4r)(a)3.b. b. If the assuming insurer is domiciled in a reciprocal jurisdiction as defined in s. Ins 52.01 (4) (b), a risk-based capital ratio of 300% of the authorized control level, calculated in accordance with the formula developed by the national association of insurance commissioners; or

Ins 52.02(4r)(a)3.c. c. If the assuming insurer is domiciled in a reciprocal jurisdiction as defined in s. Ins 52.01 (4) (c), after consultation with the reciprocal jurisdiction and considering any recommendations published through the national association of insurance commissioners committee process, such solvency or capital ratio as the commissioner determines to be an effective measure of solvency.

Ins 52.02(4r)(a)4. 4. The assuming insurer shall agree to submit and provide adequate assurance, in the form of a properly executed Form RJ-1, of its agreement to the following:

Ins 52.02 Note Note: Form RJ-1 is published as Chapter Ins 52 Appendix C.

Ins 52.02(4r)(a)4.a. a. The assuming insurer must agree to provide prompt written notice and explanation to the commissioner if it falls below the minimum requirements set forth in subd. 2. or 3., or if any regulatory action is taken against it for serious noncompliance with applicable law.

Ins 52.02(4r)(a)4.b. b. The assuming insurer must consent in writing to the jurisdiction of the courts of this state and to the appointment of the commissioner as agent for service of process. The commissioner may also require that such consent be provided and included in each reinsurance agreement under the commissioner’s jurisdiction. Nothing in this provision shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent such agreements are unenforceable under applicable insolvency or delinquency laws.

Ins 52.02(4r)(a)4.c. c. The assuming insurer must consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer or its legal successor, that have been declared enforceable in the jurisdiction where the judgment was obtained.

Ins 52.02(4r)(a)4.d. d. Each reinsurance agreement shall include a provision requiring the assuming insurer to provide security in an amount equal to 100% of the assuming insurer’s liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its legal successor on behalf of its estate, if applicable.

Ins 52.02(4r)(a)4.e. e. The assuming insurer must confirm that it is not presently participating in any solvent scheme of arrangement, which involves this state’s ceding insurers, and agrees to notify the ceding insurer and the commissioner and to provide 100% security to the ceding insurer consistent with the terms of the scheme, should the assuming insurer enter into such a solvent scheme of arrangement. Such security shall be in a form consistent with the provisions of s. Ins 52.02 (4m) or 52.04.

Ins 52.02(4r)(a)4.f. f. The assuming insurer must agree in writing to meet the applicable information filing requirements as set forth in subd. 5.

Ins 52.02(4r)(a)5. 5. The assuming insurer or its legal successor must provide, if requested by the commissioner, on behalf of itself and any legal predecessors, the following documentation to the commissioner:

Ins 52.02(4r)(a)5.a. a. For the two years preceding entry into the reinsurance agreement and on an annual basis thereafter, the assuming insurer’s annual audited financial statements, in accordance with the applicable law of the jurisdiction of its head office or domiciliary jurisdiction, as applicable, including the external audit report;

Ins 52.02(4r)(a)5.b. b. For the two years preceding entry into the reinsurance agreement, the solvency and financial condition report or actuarial opinion, if filed with the assuming insurer’s supervisor;

Ins 52.02(4r)(a)5.c. c. Prior to entry into the reinsurance agreement and not more than semi-annually thereafter, an updated list of all disputed and overdue reinsurance claims outstanding for 90 days or more, regarding reinsurance assumed from ceding insurers domiciled in the United States; and

Ins 52.02(4r)(a)5.d. d. Prior to entry into the reinsurance agreement and not more than semi-annually thereafter, information regarding the assuming insurer’s assumed reinsurance by ceding insurer, ceded reinsurance by the assuming insurer, and reinsurance recoverable on paid and unpaid losses by the assuming insurer to allow for the evaluation of the criteria set forth in subd. 6.

Ins 52.02(4r)(a)6. 6. The assuming insurer must maintain a practice of prompt payment of claims under reinsurance agreements. The lack of prompt payment will be evidenced if any of the following criteria is met:

Ins 52.02(4r)(a)6.a. a. More than 15% of the reinsurance recoverables from the assuming insurer are overdue and in dispute as reported to the commissioner;

Ins 52.02(4r)(a)6.b. b. More than 15% of the assuming insurer’s ceding insurers or reinsurers have overdue reinsurance recoverable on paid losses of 90 days or more which are not in dispute and which exceed for each ceding insurer $100,000, or as otherwise specified in a covered agreement; or

Ins 52.02(4r)(a)6.c. c. The aggregate amount of reinsurance recoverable on paid losses which are not in dispute, but are overdue by 90 days or more, exceeds $50,000,000, or as otherwise specified in a covered agreement.

Ins 52.02(4r)(a)7. 7. The assuming insurer’s supervisory authority must confirm to the commissioner on an annual basis, as of the preceding December 31 or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, that the assuming insurer complies with the requirements set forth in subds. 2. and 3.

Ins 52.02(4r)(a)8. 8. Nothing in this provision precludes an assuming insurer from providing the commissioner with information on a voluntary basis.

Ins 52.02(4r)(b) (b)

Ins 52.02(4r)(b)1g. 1g. The commissioner shall timely create and publish electronically a list of reciprocal jurisdictions.

Ins 52.02(4r)(b)1r. 1r. A list of reciprocal jurisdictions is published through the national association of insurance commissioners committee process. The commissioner’s list shall include any reciprocal jurisdiction as defined in s. Ins 52.01 (4) (a) and (b) and shall consider any other reciprocal jurisdiction included on the national association of insurance commissioners list. The commissioner may approve a jurisdiction that does not appear on the national association of insurance commissioners list of reciprocal jurisdictions as provided by applicable law, regulation or in accordance with criteria published through the national association of insurance commissioners committee process.

Ins 52.02(4r)(b)2. 2. The commissioner may remove a jurisdiction from the list of reciprocal jurisdictions upon a determination that the jurisdiction no longer meets one or more of the requirements of a reciprocal jurisdiction, as provided by applicable law, regulation, or in accordance with a process published through the national association of insurance commissioners committee process, except that the commissioner shall not remove from the list a reciprocal jurisdiction as defined in s. Ins 52.01 (4) (a) or (b). Upon removal of a reciprocal jurisdiction from this list, credit for reinsurance ceded to an assuming insurer which has its home office or is domiciled in that jurisdiction shall be allowed, if otherwise allowed pursuant to this subchapter.

Ins 52.02(4r)(c) (c)

Ins 52.02(4r)(c)1g. 1g. The commissioner shall timely create and publish electronically a list of assuming insurers that have satisfied the conditions set forth in this subsection and to which cessions shall be granted credit in accordance with this subsection.

Ins 52.02(4r)(c)1r. 1r. If a national association of insurance commissioners accredited jurisdiction has determined that the conditions set forth in par. (a) have been met, the commissioner has the discretion to defer to that jurisdiction’s determination and add such assuming insurer to the list of assuming insurers to which cessions shall be granted credit in accordance with this subsection. The commissioner may accept financial documentation filed with another national association of insurance commissioners accredited jurisdiction or with the national association of insurance commissioners in satisfaction of the requirements of par. (a).

Ins 52.02(4r)(c)2. 2. When requesting that the commissioner defer to another national association of insurance commissioners accredited jurisdiction’s determination, an assuming insurer must submit a properly executed Form RJ-1 and additional information as the commissioner may require. Notwithstanding the foregoing, the commissioner will not impose any requirement that conflicts with an applicable covered agreement. A state that has received such a request will notify other states through the national association of insurance commissioners committee process and provide relevant information with respect to the determination of eligibility.

Ins 52.02 Note Note: Form RJ-1 is published as Chapter Ins 52 Appendix C.

Ins 52.02(4r)(d) (d)

Ins 52.02(4r)(d)1g. 1g. If the commissioner determines that an assuming insurer no longer meets one or more of the requirements under this subsection, the commissioner may revoke or suspend the eligibility of the assuming insurer for recognition under this subsection.

Ins 52.02(4r)(d)1r. 1r. While an assuming insurer’s eligibility is suspended, no reinsurance agreement issued, amended, or renewed after the effective date of the suspension qualifies for credit except to the extent that the assuming insurer’s obligations under the contract are secured in accordance with s. Ins 52.04.

Ins 52.02(4r)(d)2. 2. If an assuming insurer’s eligibility is revoked, no credit for reinsurance may be granted after the effective date of the revocation with respect to any reinsurance agreements entered into by the assuming insurer, including reinsurance agreements entered into prior to the date of revocation, except to the extent that the assuming insurer’s obligations under the contract are secured in a form acceptable to the commissioner and consistent with the provisions of s. Ins 52.04.

Ins 52.02(4r)(e) (e) Before denying statement credit or imposing a requirement to post security with respect to par. (d) or adopting any similar requirement that will have substantially the same regulatory impact as security, the commissioner shall:

Ins 52.02(4r)(e)1. 1. Communicate with the ceding insurer, the assuming insurer, and the assuming insurer’s supervisory authority that the assuming insurer no longer satisfies one of the conditions listed in par. (a);

Ins 52.02(4r)(e)2. 2. Provide the assuming insurer with 30 days from the initial communication to submit a plan to remedy the defect, and 90 days from the initial communication to remedy the defect, except in exceptional circumstances in which the commissioner determines that a shorter period is necessary for policyholder and other consumer protection;

Ins 52.02(4r)(e)3. 3. After the expiration of 90 days or less, as set out in subd. 2, if the commissioner determines that no or insufficient action was taken by the assuming insurer, the commissioner may impose any of the requirements as set out in this subsection; and

Ins 52.02(4r)(e)4. 4. Provide a written explanation to the assuming insurer of any of the requirements set out in this subsection.

Ins 52.02(4r)(f) (f) If subject to a legal process of rehabilitation, liquidation, or conservation, as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring that the assuming insurer post security for all outstanding liabilities.

Ins 52.02(4r)(g) (g) Nothing in this subsection shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in that reinsurance agreement, except as expressly prohibited by this subchapter or other applicable law or regulation.

Ins 52.02(4r)(h) (h)

Ins 52.02(4r)(h)1g. 1g. Credit may be taken under this subsection only for reinsurance agreements entered into, amended, or renewed on or after June 1, 2022, and only with respect to losses incurred and reserves reported on or after the later of (i) the date on which the assuming insurer has met all eligibility requirements pursuant to this subsection, and (ii) the effective date of the new reinsurance agreement, amendment, or renewal.

Ins 52.02(4r)(h)1r. 1r. This paragraph does not alter or impair a ceding insurer’s right to take credit for reinsurance, to the extent that credit is not available under this subsection, as long as the reinsurance qualifies for credit under any other applicable provision of this subchapter.

Ins 52.02(4r)(h)2. 2. Nothing in this subsection shall authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement except as permitted by the terms of the agreement.

Ins 52.02(4r)(h)3. 3. Nothing in this subsection shall limit, or in any way alter, the capacity of parties to any reinsurance agreement to renegotiate the agreement.

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; CR 17-004: am. (intro.), (2) (g), cr. (2) (h), r. (3m), am. (4) (d), cr. (4) (e) 7., 8., (4m) Register December 2017 No. 744, eff. 1-1-18; correction in (2) (h), (4) (e) 7., 8., (4m) (a) 3. (intro.), b., d., f., 4., 5. (intro.), c. to e., 6. b., d., g., (b) 3., (c) 1., 6. (intro.), e. made under s. 35.17, Stats., and correction in (4m) (a) 5. c. made under s. 13.92 (4) (b) 7., Stats., Register December 2017 No. 744; CR 21-066: am. (intro.), (3) (intro.), (4m) (a) 3. g., 5. d., (e), cr. (4r) Register May 2022 No. 797, eff. 6-1-22; correction in (4m) (a) 3. g., 5. d., (4r) (a) 3. (intro.), 4. a., e., 7., (b) 1r., 2. made under s. 35.17, Stats., and renumbered (4r) (b) (intro.), 1., (c) (intro.), 1., (d) (intro.), 1., (h) (intro.), 1. to (4r) (b) 1g., 1r., (c) 1g., 1r., (d) 1g., 1r., (h) 1g., 1r. under s. 13.92 (4) (b) 1., Stats., Register May 2022 No. 797.

Ins 52.025 Ins 52.025 Revocation of accreditation or certification.

Ins 52.025(1) (1) The commissioner may revoke the accreditation or certification of a reinsurer under s. Ins 52.02. If the accreditation or certification 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 (4m), 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), (4), (4m), or (5) an insurer may not take credit for reinsurance ceded to the reinsurer under s. Ins 52.02 (2), (3), (4), (4m), or (5), regardless of whether the reinsurer is or remains accredited or certified 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) 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(3) (3) The commissioner may revoke the certification of a reinsurer under s. Ins 52.02 (4m) at any time if the certified reinsurer fails to meet the requirements of s. Ins 52.02 (4m).

Ins 52.025 History History: Cr. Register, July, 1993, No. 451, eff. 8-1-93; CR 17-004: am. (intro.), (1), (2), cr. (3) Register December 2017 No. 744, eff. 1-1-18; correction in (3) made under s. 35.17, Stats., Register December 2017 No. 744.

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), (4), and (4m) 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; CR 17-004: am. (1) Register December 2017 No. 744, eff. 1-1-18.

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, including those deemed exempt from filing as defined by the purposes and procedures manual of the securities valuation office, 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; CR 17-004: am. (3) Register December 2017 No. 744, eff. 1-1-18.

Ins 52.05 Ins 52.05 Trust agreements qualifying for security.

Ins 52.05(1) (1) In this section:

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) (c) “Reinsurance obligations” means:

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;

Ins 52.05(1)(c)2. 2. Reserves for reinsured losses reported and outstanding;

Ins 52.05(1)(c)3. 3. Reserves for reinsured losses incurred but not reported; and

Ins 52.05(1)(c)4. 4. Reserves for allocated reinsured loss expenses and unearned premiums.

Ins 52.05(2) (2) A ceding insurer may take credit under s. Ins 52.04 (3) only if: