Sec. 11. (a) As provided in section 7 of this chapter and subject to section 13.3 of this chapter, credit for reinsurance shall be allowed a domestic ceding insurer when the reinsurance is ceded to an assuming insurer that maintains a trust fund in a qualified United States financial institution (as defined in section 6 of this chapter) for the payment of the valid claims of its United States ceding insurers, their assigns, and successors in interest, and the assuming insurer complies with section 12 of this chapter. In order for the commissioner to determine the sufficiency of the trust fund, the assuming insurer shall report annually to the commissioner substantially the same information as that required to be reported by licensed insurers on the Annual Statement Blank. The assuming insurer shall submit to the examination of the assuming insurer's books and records by the commissioner and shall bear the expense of the examination. A trust maintained under this section shall comply with the provisions of this section.

(b) The form of a trust described in subsection (a) and any amendments to the trust must:

(1) have been approved by:

(A) the commissioner of the state where the trust is domiciled; or

(B) the commissioner of another state who, under the terms of the trust instrument, has accepted principal regulatory oversight of the trust; and

(2) be filed with the commissioner of every state in which the ceding insurer beneficiaries of the trust are domiciled.

(c) The following requirements apply to the following categories of assuming insurer:

(1) In the case of a trust of a single assuming insurer, the following apply:

(A) The trust fund shall consist of funds in trust in an amount not less than the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers.

(B) Except as provided in clause (C), the assuming insurer shall maintain a trusteed surplus of not less than twenty million dollars ($20,000,000).

(C) After the assuming insurer has, for at least three (3) full years, permanently discontinued underwriting new business secured by the trust and the commissioner that has principal regulatory oversight of the trust has performed a risk assessment:

(i) that may involve an actuarial review, including an independent analysis of reserves and cash flows; and

(ii) that considers all material risk factors, including the lines of business involved, the stability of the incurred loss estimates, and the effect of the surplus requirements specified in clause (B) on the assuming insurer's liquidity or solvency;

and determined that a surplus level that is less than the amount required by clause (B) is adequate for the protection of United States ceding insurers, policyholders, and claimants in light of reasonably foreseeable adverse loss development, the commissioner may authorize a reduction in the trusteed surplus amount required by clause (B). However, the amount required by clause (B) may not be reduced to an amount less than thirty percent (30%) of the assuming insurer's liabilities that are attributable to reinsurance ceded by United States ceding insurers covered by the trust.

(2) In the case of a group including incorporated and individual unincorporated underwriters that is an assuming insurer, the following apply:

(A) For reinsurance ceded under reinsurance agreements with an inception, amendment, or renewal date after December 31, 1992, the trust shall consist of a trusteed account in an amount not less than the respective underwriters' several liabilities attributable to business ceded by United States ceding insurers to any underwriter of the group.

(B) Notwithstanding any other provision of this chapter, for reinsurance ceded under reinsurance agreements with an inception date before January 1, 1993, and not amended or renewed after December 31, 1992, the trust shall consist of a trusteed account in an amount not less than the respective underwriters' several insurance and reinsurance liabilities attributable to business written in the United States.

(C) In addition to the trusts described in clauses (A) and (B), the group shall maintain in trust a trusteed surplus of which one hundred million dollars ($100,000,000) shall be held jointly for the benefit of United States ceding insurers of any member of the group for all years of account.

(D) The incorporated members of the group shall not be engaged in any business other than underwriting as a member of the group and shall be subject to the same level of regulation and solvency control by the group's domiciliary regulator as are the unincorporated members.

Not more than ninety (90) days after the group's financial statements are due to be filed with the group's domiciliary regulator, the group shall provide to the commissioner an annual certification by the group's domiciliary regulator of the solvency of each underwriter member. However, if a certification is unavailable, the group shall provide to the commissioner financial statements of each underwriter member of the group, prepared by independent public accountants.

(3) In the case of a group of incorporated underwriters under common administration that is an assuming insurer, the group:

(A) must have continuously transacted an insurance business outside the United States for at least three (3) years immediately before making application for accreditation;

(B) shall maintain an aggregate policyholders' surplus of at least ten billion dollars ($10,000,000,000);

(C) shall maintain a trust fund in an amount not less than the group's several liabilities attributable to business ceded by United States ceding insurers to any member of the group under reinsurance contracts issued in the name of the group;

(D) shall maintain a joint trusteed surplus of which one hundred million dollars ($100,000,000) shall be held jointly for the benefit of United States ceding insurers of any member of the group as additional security for any such liabilities; and

(E) shall, not more than ninety (90) days after the group's financial statements are due to be filed with the group's domiciliary regulator, make available to the commissioner:

(i) an annual certification of each underwriter member's solvency by the member's domiciliary regulator; and

(ii) financial statements of each underwriter member of the group prepared by the member's independent public accountant.

(d) The trust instrument of a trust shall provide that contested claims are valid and enforceable upon the final order of any court with jurisdiction in the United States.

(e) A trust shall vest legal title to the trust's assets in the trustees of the trust for the benefit of the assuming insurer's United States ceding insurers, their assigns, and successors in interest.

(f) A trust and the assuming insurer shall be subject to examination as determined by the commissioner.

(g) A trust shall remain in effect for as long as the assuming insurer has outstanding obligations due under the reinsurance agreements subject to the trust.

(h) Not later than February 28 of each year the trustee of a trust permitted under this section shall report in writing to the commissioner the following information:

(1) The balance of the trust.

(2) A listing of the trust's investments at the preceding year end.

(3) A certification of the date of termination of the trust, if applicable, or a certification that the trust shall not expire before the following December 31.

(i) Credit may only be permitted under this section if an assuming insurer also complies with section 12 of this chapter.

As added by P.L.116-1994, SEC.54. Amended by P.L.81-2012, SEC.28; P.L.124-2018, SEC.69.