Secure -1 0%
Secure -2 10%
Secure -3 20%
Secure -4 50%
Secure – 5 75%
Vulnerable – 6 100%
b. The commissioner shall require the certified reinsurer to post one hundred percent security, for the benefit of the ceding insurer or its estate, upon the entry of an order of rehabilitation, liquidation or conservation against the ceding insurer.
c. In order to facilitate the prompt payment of claims, a certified reinsurer shall not be required to post security for catastrophe recoverables for a period of up to one year from the date of the first instance of a liability reserve entry by the ceding company as a result of a loss from a catastrophic occurrence that is likely to result in significant insured losses as recognized by the commissioner. The one year deferral period is contingent upon the certified reinsurer continuing to pay claims in a timely manner in compliance with its contractual obligations as set forth in the reinsurance agreement under which the claims are ceded. Reinsurance recoverables for only the following lines of business as reported on the National Association of Insurance Commissioners annual financial statement related specifically to the catastrophic occurrence will be included in the deferral:
Line 1:Fire
Line 2: Allied Lines
Line 3: Farmowners multiple peril
Line 4: Homeowners multiple peril
Line 5: Commercial multiple peril
Line 9: Inland Marine
Line 12: Earthquake
Line 21: Auto physical damage
d. Based on an analysis of a certified reinsurer’s history of prompt payment of claims, the commissioner may make appropriate adjustments in the security the certified reinsurer is required to post to protect its liabilities to US ceding insurers. The commissioner shall, at a minimum, increase the security the certified reinsurer is required to post by one rating level if the commissioner finds that more that 15 percent of the certified reinsurers ceding insurance clients have overdue reinsurance recoverables on paid losses of ninety days or more which are not in dispute and which exceed $100,000 for each cedent or the aggregate amount of reinsurance recoverables on paid losses which are not in dispute that are overdue by ninety days or more exceeds $50,000,000.
e. In the case of a downgrade by a rating agency or other disqualifying circumstance, the commissioner shall assign by written notice a new rating to the certified reinsurer pursuant to this section. The certified reinsurer shall meet the security requirements applicable to its new rating for all business assumed as a certified reinsurer by the date specified by the commissioner in the written notice. If the rating of a certified reinsurer is upgraded by the commissioner, the certified reinsurer may meet the applicable security requirements of its new rating for reinsurance agreement entered into after the date of the upgrade. For reinsurance agreements entered into before the date of the upgrade, the certified reinsurer shall post security as required by the certified reinsurers rating before the upgrade.
f. If a certified reinsurer maintains a trust to fully secure its obligations under sub.(4)(c) and chose to secure its obligations incurred as a certified reinsurer in the form of a multibeneficiary trust, the certified reinsurer shall maintain separate trust accounts for its obligations under sub.(4)(c) and for its obligations under this subsection. As a condition for certification, the reinsurer shall have bound itself by the language of the trust and agreement with the commissioner with principal regulatory oversight of each such trust account, to fund, upon termination of any such trust account, out of the remaining surplus of such trust any deficiency of any other trust account.
g. The minimum trusteed surplus requirements provided in sub.4(c)and (d) are not applicable with respect to a multibeneficiary trust maintained by a certified reinsurer for the purpose of securing obligations incurred under this subsection, except that such trust shall maintain a minimum of trusteed surplus of $10,000,000.
h. If the security held by the certified reinsurer under this subsection is insufficient, the commissioner shall reduce the allowable credit by an amount proportionate to the deficiency and has the discretion to impose further reductions in allowable credit if there is a material risk that the certified reinsurer’s obligations will not be paid in full.
i. A certified reinsurer whose certification has been terminated for any reason shall be treated as a certified reinsurer required to secure 100% of its obligations.
7. The assuming insurer must satisfy any other requirements for certification deemed relevant by the commissioner.
(b) An association including incorporated and individual unincorporated underwriters may be a certified reinsurer. In order to be eligible for certification, in addition to satisfying the requirements of par. (a):
1. The association shall satisfy its minimum capital and surplus requirement through capital and surplus equivalents, net of liabilities, of the association and its members, which shall include a joint central fund that may be applied to any unsatisfied obligation of the association.
2. The incorporated members of the association shall not be engaged in any business other than underwriting as a member of the association and shall be subject to the same level of regulation and solvency control by the association’s domiciliary regulator as are the unincorporated members.
3. Within ninety days after its financial statements are due to be filed with the association’s domiciliary regulator, the association shall provide the commissioner an annual certification by the association’s domiciliary regulator of the solvency of each underwriter member or, if certification is unavailable, financial statements prepared by independent public accountants of each underwriter member of the association.
(c) The commissioner shall create and publish electronically a list of qualified jurisdictions under which an assuming insurer licensed and domiciled therein is eligible to be considered for certification by the commissioner. Qualified jurisdictions shall be determined using the following criteria:
1. In order to determine whether the domiciliary jurisdiction of a non-US insurer is eligible to be recognized as a qualified jurisdiction, the commissioner shall evaluate the appropriateness and effectiveness of the reinsurance supervisory system of the jurisdiction, both initially and on an ongoing basus, and consider the rights, benefits, and the extent of reciprocal recognition afforded by the non-US jurisdiction to reinsurers licensed and domiciled in the United States. A qualified jurisdiction shall agree to share information and cooperate with the commissioner with respect to all certified reinsurers domiciled within that jurisdiction. A jurisdiction may not be recognized as a qualified jurisdiction if the commissioner has determined that the jurisdiction does not adequately and promptly enforce final US judgments and arbitration awards.
2. The commissioner shall consider the list of qualified jurisdictions published through the National Association of Insurance Commissioners in determining qualified jurisdictions. If the commissioner approves a jurisdiction as qualified that does not appear on the National Association of Insurance Commissioners list, the commissioner shall provide a justification for determining the jurisdiction is qualified. Factors to be considered in determining whether to recognize a qualified jurisdiction include:
a. The framework under which the assuming insurer is regulated.
b. The structure and authority of the domiciliary regulator with regard to solvency regulation requirements and financial surveillance.
c. the substance of financial and operating standards for assuming insurers in the domiciliary jurisdiction.
d. The form and substance of financial reports required to be filed or made publically available by reinsurers in the domiciliary jurisdiction and the accounting principles used.
e. The domiciliary regulator’s willingness to cooperate with U.S. regulators in general and the commissioner in particular.
f. The history of performance by assuming insurers in the domiciliary jurisdiction.
g. Any documented evidence of substantial problems with enforcement of final U.S. judgments in the domiciliary jurisdiction. A jurisdiction will not be considered to be a qualified jurisdiction if the commissioner has determined that it does not adequately and promptly enforce final U.S. judgments and arbitration awards.
h. Any relevant international standards or guidance with respect to mutual recognition of reinsurance supervision adopted by the International Association of Insurance Supervisors.
i. Any other matters deemed relevant by the commissioner.
3. U.S. jurisdictions that meet the requirements for accreditation under the National Association of Insurance Commissioners financial standards and accreditation program shall be recognized as qualified jurisdictions.
(d) If an applicant has been certified as a reinsurer in a National Association of Insurance Commissioners accredited jurisdiction, the commissioner has the discretion to defer to that jurisdiction’s certification, and has the discretion to defer to the rating assigned by that jurisdiction if the assuming insurer submits Form CR-1 and such additional information as the commissioner requires. The commissioner’s recognition of another accredited jurisdiction’s certification is subject to the following conditions.
1. Any change in the certified reinsurer’s status or rating in the other jurisdiction shall apply automatically in this State as of the date it takes effect in the other jurisdiction. The certified reinsurer shall notify the commissioner of any change in its status or rating within 10 days of receiving notice of the change.
2. The commissioner may withdraw recognition of the other jurisdiction’s rating at any time and assign a new rating in accordance with this section.
3. The commissioner may withdraw recognition of the other jurisdiction’s certification at any time, with written notice to the reinsurer. Unless the commissioner suspends or revokes the certified reinsurer’s certification in accordance with s. Ins 52.025, the certified reinsurer’s certification shall remain in good standing in this state for a period of three months, which may be extended if additional time is necessary to consider the assuming insurer’s application for certification in this state. (e) A certified reinsurer that ceases to assume new business from ceding insurers domiciled in this state may request to maintain its certification in inactive status in order to continue to qualify for a reduction in security for its in-force business. An inactive certified reinsurer shall continue to comply with all applicable requirements of this chapter, and the commissioner shall assign a rating that takes into account the reasons why the reinsurer is not assuming new business.
(f) In addition to the clauses required under this chapter, reinsurance contracts entered or renewed under this subsection shall include a proper funding clause, which requires the certified reinsurer to provide and maintain security in an amount sufficient to avoid the imposition of any financial statement penalty on the ceding insurer under this section for reinsurance ceded to the certified reinsurer.
(g) The commissioner shall comply with all reporting and notification requirements that may be established by the National Association of Insurance Commissioners with respect to certified reinsurers and qualified jurisdictions.
(h) Credit for reinsurance under this subsection shall apply only to reinsurance contracts entered into or renewed on or after the effective date of the certification of the assuming insurer.
(i) Nothing in this subsection shall prohibit the parties to a reinsurance agreement from agreeing to provisions establishing security requirements that exceed the minimum security requirements established for certified reinsurers in this subsection.
(j) The commissioner may retain at the certified reinsurer’s expense such experts as shall be necessary to assist in the review of an initial application for certification and on an ongoing basis. Any experts so retained shall be under the direction and control of the commissioner. The commissioner may retain such experts as may be necessary to evaluate the supervisory systems of jurisdictions under evaluation for eligibility to become a qualified jurisdiction and on an ongoing basis. The expense for such experts shall be paid by the reinsurers seeking certification from that jurisdiction.
