Ins 52.02(4m)(a)5.a.a. Notification within 10 days of any regulatory actions taken against the certified reinsurer, any changes in the provisions of its domiciliary license or any change in rating by an approved rating agency, including a statement describing changes and the reasons therefore. Ins 52.02 NoteNote: Forms CR-F and CR-S are published as Chapter Ins 52 Appendices D to H. Ins 52.02(4m)(a)5.c.c. Annually, the report of the independent auditor on the financial statements of the insurance enterprise, on the basis described in subd. 3. f. Ins 52.02(4m)(a)5.d.d. Annually, the most recent audited financial statements, regulatory filings, and actuarial opinion, as filed with the certified reinsurer’s supervisor with a translation into English. Upon the initial certification, audited financial statements for the last 2 years filed with the certified reinsurer’s supervisor. Ins 52.02(4m)(a)5.e.e. At least annually, an updated list of all disputed and overdue reinsurance claims which meet the thresholds described in subd. 3. b. regarding reinsurance assumed from U.S. domestic ceding insurers. Ins 52.02(4m)(a)5.f.f. Annually, a certification for the certified reinsurer’s domestic regulator that the certified reinsurer is in good standing and maintains capital in excess of the jurisdiction’s highest regulatory action level. Ins 52.02(4m)(a)5.g.g. An annual renewal application for certification by October 1st to be considered for certification for the next calendar year. Ins 52.02(4m)(a)6.6. The certified reinsurer shall secure its obligations assumed from U.S. ceding insurers at a level consistent with the rating set by the commissioner. The credit allowed shall be based upon the security held by or on behalf of the ceding insurer in accordance with the rating assigned to the reinsurer by the commissioner and shall be maintained in a form that is consistent with s. Ins 52.05 and this section, for multibeneficiary trusts. The amount of security required in order for full credit to be allowed shall correspond with the following requirements: Secure -1 0%
Secure -2 10%
Secure -3 20%
Secure -4 50%
Secure – 5 75%
Vulnerable – 6 100%
Ins 52.02(4m)(a)6.b.b. The commissioner shall require the certified reinsurer to post 100% 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. Ins 52.02(4m)(a)6.c.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
Ins 52.02(4m)(a)6.d.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 U.S. 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% of the certified reinsurers ceding insurance clients have overdue reinsurance recoverables on paid losses of 90 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 90 days or more exceeds $50,000,000. Ins 52.02(4m)(a)6.e.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 agreements 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 reinsurer’s rating before the upgrade. Ins 52.02(4m)(a)6.f.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. Ins 52.02(4m)(a)6.g.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. Ins 52.02(4m)(a)6.h.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. Ins 52.02(4m)(a)6.i.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. Ins 52.02(4m)(a)7.7. The assuming insurer must satisfy any other requirements for certification deemed relevant by the commissioner. Ins 52.02(4m)(b)(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): Ins 52.02(4m)(b)1.1. 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. Ins 52.02(4m)(b)2.2. 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. Ins 52.02(4m)(b)3.3. Within 90 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. Ins 52.02(4m)(c)(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: Ins 52.02(4m)(c)1.1. In order to determine whether the domiciliary jurisdiction of a non-U.S. 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 basis, and consider the rights, benefits, and the extent of reciprocal recognition afforded by the non-U.S. 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 U.S. judgments and arbitration awards. Ins 52.02(4m)(c)2.2. 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: Ins 52.02(4m)(c)2.b.b. The structure and authority of the domiciliary regulator with regard to solvency regulation requirements and financial surveillance. Ins 52.02(4m)(c)2.c.c. The substance of financial and operating standards for assuming insurers in the domiciliary jurisdiction. Ins 52.02(4m)(c)2.d.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. Ins 52.02(4m)(c)2.e.e. The domiciliary regulator’s willingness to cooperate with U.S. regulators in general and the commissioner in particular. Ins 52.02(4m)(c)2.f.f. The history of performance by assuming insurers in the domiciliary jurisdiction. Ins 52.02(4m)(c)2.g.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. Ins 52.02(4m)(c)2.h.h. Any relevant international standards or guidance with respect to mutual recognition of reinsurance supervision adopted by the International Association of Insurance Supervisors. Ins 52.02(4m)(c)3.3. 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. Ins 52.02(4m)(d)(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: Ins 52.02(4m)(d)1.1. 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. Ins 52.02(4m)(d)2.2. The commissioner may withdraw recognition of the other jurisdiction’s rating at any time and assign a new rating in accordance with this section. Ins 52.02(4m)(d)3.3. 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. Ins 52.02(4m)(e)(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 subchapter, and the commissioner shall assign a rating that takes into account the reasons why the reinsurer is not assuming new business. Ins 52.02(4m)(f)(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. Ins 52.02(4m)(g)(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. Ins 52.02(4m)(h)(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. Ins 52.02(4m)(i)(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. Ins 52.02(4m)(j)(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. 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.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(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.
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