Chapter Ins 52

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)2.i. i. Any other matters deemed relevant by the commissioner.

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 Note Note: Form CR-1 is published as Chapter Ins 52 Appendix B.

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.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.