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Delaware General AssemblyDelaware RegulationsMonthly Register of RegulationsAugust 2013

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(18 Del.C. §§311 and 915 and 29 Del.C. Ch. 101)
Proposed amended Regulation 1003 relating to Credit for Reinsurance [Formerly Regulation 79] was published in the Delaware Register of Regulations on May 1, 2013. The comment period remained open until May 31, 2013. There was no public hearing on proposed amended Regulation 1003. Public notice of the proposed amended Regulation 1003 in the Register of Regulations was in conformity with Delaware Law.
1. 18 Del.C. §910 et. seq. of the Insurance Code requires a regulation to set forth rules and procedural requirements which the Commissioner deems necessary to carry out the provisions of the Code.
Based on the provisions of 18 Del.C. §§ 311 and 915, and of 29 Del.C. Ch. 101, and the record in this docket, I hereby adopt Regulation 1003 as amended as may more fully and at large appear in the version attached hereto to be effective on August 15, 2013.
The text of proposed amended Regulation 1003 last appeared in the Register of Regulations Vol. 16, Issue 11, pages 1150-1151.
Insurance Commissioner
This regulation is promulgated pursuant to the authority granted by 18 Del.C. §§314 and 910 et seq. of the Insurance Code, and in accordance with the Delaware Administrative Procedures Act, 29 Del.C. Ch. 101. All references to section numbers shall refer to Title 18 (the Insurance Code) unless otherwise noted.
The purpose of this regulation is to set forth rules and procedural requirements which the commissioner deems necessary to carry out the provisions of 18 Del.C. §910 et seq. of the Insurance Code. The actions and information required by this regulation are hereby declared to be necessary and appropriate in the public interest and for the protection of the ceding insurers in this state.
Pursuant to 18 Del.C. §911(a) of the Act, the commissioner shall allow credit for reinsurance ceded by a domestic insurer to assuming insurers which were licensed in this state as of the date of the ceding insurer's financial statement.
5.1 Pursuant to 18 Del.C. §911(b) of the Act, the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer which is accredited as a reinsurer in this state as of the date of the ceding insurer's statutory financial statement. An accredited reinsurer is one which:
6.1 Pursuant to 18 Del.C. §911(c) of the Act the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer which as of the date of the ceding insurer's statutory financial statement:
7.1 Pursuant to 18 Del.C. §911(d) of the Act, the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer which, as of the date of the ceding insurer's statutory financial statement maintains a trust fund in an amount prescribed below in a qualified United States financial institution as defined in 18 Del.C. §913 of the Act, for the payment of the valid claims of its United States policyholders and ceding insurers, their assigns and successor in interest. The assuming insurer shall report annually to the commissioner substantially the same information as that required to be reported on the NAIC annual statement form by licensed insurers, to enable the commissioner to determine the sufficiency of the trust fund.
Pursuant to 18 Del.C. §911(e), the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of 18 Del.C. § 911(a), (b), (c) or (d), but only with respect to the insurance of risks located in jurisdictions where such reinsurance is required by the applicable law or regulation of that jurisdiction. As used in this section, "jurisdiction" means any state, district or territory of the United States and any lawful national government.
9.1 Pursuant to 18 Del.C. §912, the commissioner shall allow a reduction from liability for reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of 18 Del.C. §911 in an amount not exceeding the liabilities carried by the ceding insurer. Such reduction shall be in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the exclusive benefit of the ceding insurer, under a reinsurance contract with such assuming insurer as security for the payment of obligations thereunder. Such security must be held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer or, in the case of a trust, held in a qualified United States financial institution as defined in 18 Del.C. §913. This security may be in the form of any of the following:
9.1.3 Clean, irrevocable, unconditional and "evergreen" letters of credit issued or confirmed by a qualified United States institution, as defined in 18 Del.C. §912(c), effective no later than December 31 of the year for which filing is being made, and in the possession of the ceding company on or before the filing date of its annual statement. Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance (or confirmation) shall, notwithstanding the issuing (or confirming) institution's subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification or amendment, whichever first occurs.
10.1.1 "Beneficiary" means the entity for whose sole benefit the trust has been established and any successor of the beneficiary by operation of law. If a court of law appoints a successor in interest to the named beneficiary, then the named beneficiary includes and is limited to the court appointed domiciliary receiver (including conservator, rehabilitator or liquidator).
10.1.2 "Grantor" means the entity that has established a trust for the sole benefit of the beneficiary. When established in conjunction with a reinsurance agreement, the grantor is the unlicensed, unaccredited assuming insurer.
10.1.3 "Obligations", as used in section 10.2.4.11 of this section, means:
11.1 The letter of credit must be clean, irrevocable and unconditional and issued or confirmed by a qualified United States financial institution as defined in 18 Del.C. §913. The letter of credit shall contain an issue date and date of expiration and shall stipulate that the beneficiary need only draw a sight draft under the letter of credit and present it to obtain funds and that no other document need be presented. The letter of credit shall also indicate that it is not subject to any condition or qualifications outside of the letter of credit. In addition, the letter of credit itself shall not contain reference to any other agreements, documents of entities, except as provided in section 11.2 below. As used in this section, "beneficiary" means the domestic insurer for whose benefit the letter of credit has been established any successor of the beneficiary by operation of law. If a court of law appoints a successor in interest to the named beneficiary, then the named beneficiary includes and is limited to the court appointed domiciliary receiver (including conservator, rehabilitator or liquidator).
13.1.1 Includes a proper insolvency clause pursuant to 18 Del.C. §914 of the Insurance Code; and
13.1.2 Includes a provision pursuant to 18 Del.C. §911(f) whereby the assuming insurer, if an unauthorized assuming insurer, has submitted to the jurisdiction of an alternative dispute resolution panel or court of competent jurisdiction within the United States, has agreed to comply with all requirements necessary to give such court of panel jurisdiction, has designated an agent upon whom service of process may be effected, and has agreed to abide by the final decision of such court panel.
This regulation is promulgated pursuant to the authority granted by 18 Del.C. §§311 and 915 of the Insurance Code; and 29 Del.C., Ch. 101.
The purpose of this regulation is to set forth rules and procedural requirements that the Commissioner deems necessary to carry out the provisions of 18 Del.C. §§910-916. (the “Reinsurance Act”). The actions and information required by this regulation are declared to be necessary and appropriate in the public interest and for the protection of the ceding insurers in this state.
7.2.4 The trust fund for a group of incorporated insurers under common administration, whose members possess aggregate policyholders surplus of $10,000,000,000 (calculated and reported in substantially the same manner as prescribed by the annual statement instructions and Accounting Practices and Procedures Manual of the NAIC) and which has continuously transacted an insurance business outside the United States for at least three (3) years immediately prior to making application for accreditation, shall:
8.2.8.4 Upon revocation of the certification of a certified reinsurer by the Commissioner, the assuming insurer shall be required to post security in accordance with Section 10.0 in order for the ceding insurer to continue to take credit for reinsurance ceded to the assuming insurer. If funds continue to be held in trust in accordance with Section 7.0, the Commissioner may allow additional credit equal to the ceding insurer’s pro rata share of such funds, discounted to reflect the risk of uncollectibility and anticipated expenses of trust administration. Notwithstanding the change of a certified reinsurer’s rating or revocation of its certification, a domestic insurer that has ceded reinsurance to that certified reinsurer may not be denied credit for reinsurance for a period of three (3) months for all reinsurance ceded to that certified reinsurer, unless the reinsurance is found by the Commissioner to be at high risk of uncollectibility.
Last Updated: December 31 1969 19:00:00.
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