Chapter Ins 52

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:

Ins 52.05(2)(a) (a) There is a written trust agreement between the beneficiary, the grantor and a trustee and the trustee is a qualified fiduciary United States financial institution.

Ins 52.05(2)(b) (b) The trust agreement creates a trust account and all the assets are deposited in the trust account.

Ins 52.05(2)(c) (c) The trustee holds all assets in the trust account at the trustee’s office in the United States, except that a bank may apply for the permission of the commissioner or equivalent official of the ceding insurer’s state of domicile or entry to use a foreign branch office of the bank as trustee for trust agreements established under this section. If the commissioner or equivalent official approves the use of a foreign branch office as trustee, then its use must be approved by the beneficiary in writing and the trust agreement must provide that the written notice described in par. (d) 1. must also be presentable, as a matter of legal right, at the trustee’s principal office in the United States.

Ins 52.05(2)(d) (d) The trust agreement provides that:

Ins 52.05(2)(d)1. 1. The beneficiary may withdraw assets from the trust account at any time, without notice to the grantor, subject only to written notice from the beneficiary to the trustee;

Ins 52.05(2)(d)2. 2. No statement or document is required to be presented in order to withdraw assets, except that the beneficiary may be required to acknowledge receipt of withdrawn assets;

Ins 52.05(2)(d)3. 3. It is not subject to any conditions or qualifications outside of the trust agreement; and

Ins 52.05(2)(d)4. 4. It does not contain references to any other agreements or documents except as provided under par. (k).

Ins 52.05(2)(e) (e) The trust agreement is established for the sole benefit of the beneficiary.

Ins 52.05(2)(f) (f) The trust agreement requires the trustee to:

Ins 52.05(2)(f)1. 1. Receive assets and hold all assets in a safe place;

Ins 52.05(2)(f)2. 2. Determine that all assets are in such form that the beneficiary, or the trustee upon direction by the beneficiary, may whenever necessary negotiate any of the assets, without consent or signature from the grantor or any other person;

Ins 52.05(2)(f)3. 3. Furnish to the grantor and the beneficiary a statement of all assets in the trust account upon its inception and at intervals no less frequent than the end of each calendar quarter;

Ins 52.05(2)(f)4. 4. Notify the grantor and the beneficiary within 10 days, of any deposits to or withdrawals from the trust account;

Ins 52.05(2)(f)5. 5. Upon written demand of the beneficiary, immediately take any and all steps necessary to transfer absolutely and unequivocally all right, title and interest in the assets held in the trust account to the beneficiary and deliver physical custody of the assets to the beneficiary; and

Ins 52.05(2)(f)6. 6. Allow no substitutions or withdrawals of assets from the trust account, except on written instructions from the beneficiary, except that the trustee may, without the consent of but with notice to the beneficiary, upon call or maturity of any trust asset, withdraw such asset upon condition that the proceeds are paid into the trust account.

Ins 52.05(2)(g) (g) The trust agreement provides that at least 30 days, but not more than 45 days, prior to termination of the trust account, written notification of termination shall be delivered by the trustee to the beneficiary.

Ins 52.05(2)(h) (h) The trust agreement provides that it is subject to and governed by the laws of the state in which the trust is established.

Ins 52.05(2)(i) (i) The trust agreement prohibits invasion of the trust corpus for the purpose of paying compensation to, or reimbursing the expenses of, the trustee. In order for a letter of credit to qualify as an asset of the trust, the trustee shall have the right and the obligation pursuant to the deed of trust or some other binding agreement, approved by the commissioner, to immediately draw down the full amount of the letter of credit and hold the proceeds in trust for the beneficiaries of the trust if the letter of credit will otherwise expire without being renewed or replaced.