20-261.02. Reduction from liability for reinsurance ceded by a domestic insurer to an assuming insurer

A. A reduction from liability for the reinsurance that is ceded by a domestic insurer to an assuming insurer who does not meet the requirements of section 20-261.01 shall be allowed in the amount of monies that are held by or on behalf of the ceding insurer and that do not exceed the liabilities carried by the ceding insurer, including:

1. Security that is held in the United States subject to withdrawal solely by and under the exclusive control of the ceding insurer and monies held in trust for the ceding insurer, including monies held in trust, under a reinsurance contract with the assuming insurer as security for the payment of obligations thereunder.

2. In the case of a trust, monies held in a qualified United States financial institution as defined in section 20-261.03, subsection B.

B. The security that is required by subsection A of this section may be in the form of:

1. Cash.

2. Securities that are listed by the securities valuation office of the national association of insurance commissioners and that qualify as admitted assets.

3. Clean, irrevocable and unconditional letters of credit that are issued or confirmed by a qualified United States financial institution as defined in section 20-261.03, subsection A, that are issued no later than December 31 in the year for which filing is made and that are in the possession of the ceding company on or before the filing date of the ceding company's annual statement. Notwithstanding the issuing or confirming institution's subsequent failure to meet the applicable standards of issuer acceptability, letters of credit that meet applicable standards of issuer acceptability as to the date of issuance or confirmation are acceptable as security until their expiration, extension, renewal, modification or amendment, whichever first occurs.

4. Any other form of security that is acceptable to the director.