Summary of Eleventh Amendment to 11 NYCRR 125 (Insurance Regulations 17, 20, and 20-A)
The following is a summary of the substance of the amendment to the rule:
Section 125.4 is amended by repealing the current Section 125.4(h) and enacting a new Section 125.4(h). Substantively, the new Section 125.4(h) does not differ extensively from the repealed provision; rather, the new provision conforms New Yorkís regulatory language more closely to that of the National Association of Insurance Commissionerís recently adopted Credit for Reinsurance Model Law and Model Regulation. The new Section 125.4(h), similar to the provision that it replaces, provides an alternative method for allowing ceding insurers balance sheet credit for cessions to unauthorized assuming insurers. This section adjusts the credit that a ceding insurer may take in its financial statement based upon the financial strength of the unauthorized assuming insurer. In order to allow the ceding insurer to take full credit for the reinsurance without the assuming insurer posting 100% collateral, the unauthorized assuming insurer in the transaction must:
1) maintain a minimum net worth of $250 million;
2) be authorized and meet the standards of solvency and capital adequacy in its domiciliary jurisdiction;
3) have a credit rating from at least two rating agencies;
4) file documents with the Superintendent evidencing its financial condition; and
5) have been assigned a rating from the Superintendent authorizing the ceding insurer to take credit for the reinsurance without the assuming insurer posting 100% collateral.
The reinsurance contract itself must contain an insolvency clause, a funding clause, a designation of a person in New York or the ceding insurerís domestic state for service of process, a requirement that any disputes will be subject to United States courts and laws, and a requirement that the unauthorized assuming insurer will notify the ceding insurer of any changes in its license status or any change in its rating from a credit rating agency.
While this alternative credit for cessions to unauthorized assuming insurers will reduce the collateral requirement in a manner that corresponds to the financial strength of the unauthorized assuming insurer, where an order of rehabilitation, liquidation or conservation is entered against the ceding insurer, the unauthorized assuming insurer must, as a general matter, post full collateral for all outstanding liabilities owed to the ceding insurer.
Section 125.5 is amended to conform certain language to that of section 125.4(h) as revised.
Section 125.7 is amended to conform certain language to that of section 125.4(h) as revised.
. Section 125.8 is amended to conform certain language to that of section 125.4(h) as revised.