(a)

(1) An asset or a reduction from liability for the reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of § 56-2-208 shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer. However, the commissioner may adopt by rule pursuant to subsection (g) specific additional requirements relating to or setting forth:

(A) The valuation of assets or reserve credits;

(B) The amount and forms of security supporting reinsurance arrangements described in subsection (g); and

(C) The circumstances pursuant to which credit will be reduced or eliminated.

(2) The reduction shall be in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the ceding insurer, under a reinsurance contract with the assuming insurer as security for the payment of obligations under the contract, if the security is 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. This security may be in the form of:

(A) Cash;

(B) Securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners, including those deemed exempt from filing as defined by the Purposes and Procedures Manual of the Securities Valuation Office, and qualifying as admitted assets;

(C) Clean, irrevocable, unconditional letters of credit, issued or confirmed by a qualified United States financial institution 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; or

(D) Any other form of security acceptable to the commissioner.

(b) 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.

(c) For purposes of subdivision (a)(3), a “qualified United States financial institution” means an institution that:

(1) Is organized or licensed, in the case of a United States office of a foreign banking organization, under the laws of the United States or any state in the United States;

(2) Is regulated, supervised and examined by United States federal or state authorities having regulatory authority over banks and trust companies; and

(3) Has been determined by either the commissioner, or the Securities Valuation Office of the National Association of Insurance Commissioners, to meet the standards of financial condition and standing considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the commissioner.

(d) For purposes of those provisions of this chapter specifying those institutions that are eligible to act as a fiduciary of a trust, “qualified United States financial institution” means an institution that:

(1) Is organized or licensed, in the case of a United States branch or agency office of a foreign banking organization, under the laws of the United States or any state and has been granted authority to operate with fiduciary powers; and

(2) Is regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies.

(e) The commissioner may adopt rules and regulations implementing this section and § 56-2-208. The rules and regulations shall be promulgated pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

(f) This section and § 56-2-208 apply to all cessions after July 1, 1993, under reinsurance agreements that have had an inception, anniversary, or renewal date not less than six (6) months after July 1, 1993.

(g)

(1) The commissioner is further authorized to promulgate rules applicable to reinsurance arrangements described in this subdivision (g)(1) relating to:

(A) Life insurance policies with guaranteed nonlevel gross premiums or guaranteed nonlevel benefits;

(B) Universal life insurance policies with provisions resulting in the ability of a policyholder to keep a policy in force over a secondary guarantee period;

(C) Variable annuities with guaranteed death or living benefits;

(D) Long-term care insurance policies; or

(E) Other life and health insurance and annuity products as to which the commissioner adopts regulatory requirements with respect to credit for reinsurance.

(2) A rule promulgated pursuant to subdivision (g)(1)(A) or (g)(1)(B) may apply to any treaty containing:

(A) Policies issued on or after January 1, 2015; or

(B) Policies issued prior to January 1, 2015, if risk pertaining to such pre-2015 policies is ceded in connection with the treaty, in whole or in part, on or after January 1, 2015.

(3) A rule promulgated pursuant to this subsection (g) may require the ceding insurer, in calculating the amounts or forms of security required to be held under rules promulgated under this authority, to use the Valuation Manual adopted by the National Association of Insurance Commissioners (NAIC) under Section 11B(1) of the NAIC Standard Valuation Law, including all amendments adopted by the NAIC and in effect on the date as of which the calculation is made, to the extent applicable.

(4) A rule promulgated pursuant to this subsection (g) does not apply to cessions to an assuming insurer that:

(A) Is certified in this state or certified in a minimum of five (5) other states; or

(B) Maintains at least two hundred and fifty million dollars ($250,000,000) in capital and surplus, determined in accordance with the NAIC Accounting Practices and Procedures Manual, including all amendments to such manual that are adopted by the NAIC, excluding the impact of any permitted or prescribed practices; and is:

(i) Licensed in at least twenty-six (26) states; or

(ii) Licensed in at least ten (10) states, and licensed or accredited in a total of at least thirty-five (35) states.

(5) The authority to promulgate rules pursuant to this subsection (g) does not limit the commissioner's authority to adopt rules pursuant to subsection (e). All rules under this subsection (g) must be promulgated in accordance with the Uniform Administrative Procedures Act.