Ins 55.01(1)(c)(c) Licensed property and casualty insurers which are not subject to a substantially similar rule or law in their state of domicile with respect to their accident and health business.

Ins 55.01(2)(2) This rule does not apply to assumption reinsurance, yearly renewable term reinsurance or nonproportional reinsurance such as stop loss or catastrophe reinsurance.

Ins 55.02(1)(1) No insurer may, for reinsurance ceded, reduce any liability or establish any asset in any financial statement filed with the office of the commissioner of insurance if, by the terms of the reinsurance agreement, in substance or effect, any of the following conditions exist:

Ins 55.02(1)(a)(a) Renewal expense allowances provided, or to be provided, to the ceding insurer by the reinsurer in any accounting period, are not sufficient to cover anticipated allocable renewal expenses of the ceding insurer on the portion of the business reinsured, unless a liability is established for the present value of the shortfall using assumptions equal to the applicable statutory reserve basis on the business reinsured. Those expenses include commissions, premium taxes and direct expenses including, but not limited to, billing, valuation, claims and maintenance expected by the company at the time the business is reinsured.

Ins 55.02(1)(b)(b) The ceding insurer can be deprived of surplus or assets at the reinsurer’s option or automatically upon the occurrence of some event, such as the insolvency of the ceding insurer, other than termination of the reinsurance agreement by the reinsurer for nonpayment of reinsurance premiums or other amounts due, such as modified coinsurance reserve adjustments, interest and adjustments on funds withheld, and tax reimbursements.

Ins 55.02(1)(c)(c) The ceding insurer is required to reimburse the reinsurer for negative experience under the reinsurance agreement, other than offsetting experience refunds against current and prior years’ losses under the agreement, or payment by the ceding insurer of an amount equal to the current and prior years’ losses under the agreement upon voluntary termination of in force reinsurance by the ceding insurer. Voluntary termination does not include situations where termination occurs because of unreasonable provisions which allow the reinsurer to reduce its risk under the agreement, including, but not limited to, a provision which provides that it is the right of the reinsurer to increase reinsurance premiums or risk and expense charges to excessive levels which forces the ceding company to prematurely terminate the reinsurance agreement.

Ins 55.02(1)(d)(d) The ceding insurer must, at specific points in time scheduled in the agreement, terminate or automatically recapture all or part of the reinsurance ceded.

Ins 55.02(1)(e)(e) The reinsurance agreement involves the possible payment by the ceding insurer to the reinsurer of amounts other than from income realized from the reinsured policies or the ceding insurer is required to pay reinsurance premiums, or other fees or charges, to a reinsurer which are greater than the direct premiums collected by the ceding company.

Ins 55.02(1)(f)(f) The treaty does not transfer all of the significant risk inherent in the business being reinsured.

Ins 55.02(1)(g)1.1. Except as provided by subd. 2., the credit quality, reinvestment, or disintermediation risk is significant for the business reinsured and the ceding company does not either transfer the underlying assets to the reinsurer or legally segregate such assets in a trust or escrow account or otherwise establish a mechanism satisfactory to the commissioner which legally segregates, by contract or contract provision, the underlying assets.

Ins 55.02(1)(g)2.2. The assets supporting the reserves for classes of business which do not have a significant credit quality, reinvestment or disintermediation risk, for the following classes of business, may be held by the ceding company without segregation of the assets:

Ins 55.02(1)(g)3.3. The associated formula for determining the reserve interest rate adjustment must use a formula which reflects the ceding company’s investment earnings and incorporates all realized and unrealized gains and losses reflected in the statutory statement. The following is an acceptable formula:

Where: I is the net investment income
CG is capital gains less capital losses
X is the current year cash and invested assets plus investment income due and accrued less borrowed money
Y is the same as X but for the prior year