CHAPTER 10. CREDIT FOR REINSURANCE

IC 27-6-10
     Chapter 10. Credit for Reinsurance

IC 27-6-10-1
"Accredited reinsurer" defined
    
Sec. 1. As used in this chapter, "accredited reinsurer" means an insurer that:
        (1) files with the commissioner evidence of the insurer's submission to Indiana jurisdiction;
        (2) submits to Indiana authority to examine the insurer's books and records;
        (3) is:
            (A) licensed to transact insurance or reinsurance in at least one (1) state; or
            (B) in the case of a United States branch of an alien company (as defined in IC 27-1-2-3), entered through and licensed to transact insurance or reinsurance in at least one (1) state; and
        (4) files annually with the commissioner a copy of the insurer's annual statement filed with the insurance department of the insurer's state of domicile and a copy of the insurer's most recent audited financial statement, and:
            (A) maintains a surplus as regards policyholders in an amount not less than twenty million dollars ($20,000,000) and whose accreditation has not been denied by the commissioner within ninety (90) days of submission; or
            (B) maintains a surplus as regards policyholders in an amount less than twenty million dollars ($20,000,000) and whose accreditation has been approved by the commissioner.
As added by P.L.116-1994, SEC.54.

IC 27-6-10-2
"Ceding insurer" defined
    
Sec. 2. As used in this chapter, "ceding insurer" has the meaning set forth in IC 27-6-1.1-1.
As added by P.L.116-1994, SEC.54.

IC 27-6-10-3
"Commissioner" defined
    
Sec. 3. As used in this chapter, "commissioner" refers to the insurance commissioner appointed under IC 27-1-1-2.
As added by P.L.116-1994, SEC.54.

IC 27-6-10-4
"Department" defined
    
Sec. 4. As used in this chapter, "department" refers to the department of insurance created under IC 27-1-1-1.
As added by P.L.116-1994, SEC.54.

IC 27-6-10-5 "Qualified United States financial institution" as used in IC 27-6-10-14(c)
    
Sec. 5. As used in section 14(c) of this chapter, "qualified United States financial institution" means an institution that:
        (1) is organized, or in the case of a United States office of a foreign banking organization, licensed under the laws of the United States or any state thereof;
        (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 the commissioner or the Securities Valuation Office of the National Association of Insurance Commissioners to meet the standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the commissioner.
As added by P.L.116-1994, SEC.54.

IC 27-6-10-6
"Qualified United States financial institution" as used in IC 27-6-10-11(a) and IC 27-6-10-14(b)
    
Sec. 6. As used in sections 11(a) and 14(b) of this chapter, "qualified United States financial institution" means an institution that:
        (1) is organized, or in the case of a United States branch or agency office of a foreign banking organization, licensed under the laws of the United States or any state thereof 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.
As added by P.L.116-1994, SEC.54.

IC 27-6-10-7
Asset or deduction from liability; requirements
    
Sec. 7. Credit for reinsurance shall be allowed to any domestic ceding insurer as either an asset or a deduction from liability on account of reinsurance ceded only when:
        (1) the reinsurer meets the requirements of:
            (A) section 8 of this chapter;
            (B) section 9 of this chapter;
            (C) sections 10 and 12 of this chapter;
            (D) sections 11 and 12 of this chapter; or
            (E) section 13 of this chapter; and
        (2) the reinsurance contract provides in substance that, in the event of the insolvency of the ceding insurer, the reinsurance is payable under a contract reinsured by the assuming insurer on the basis of reported claims allowed in the liquidation proceedings, subject to court approval, without diminution because of the insolvency of the ceding insurer. Payments under

this subdivision must be made directly to the ceding insurer or to the ceding insurer's domiciliary liquidator except as provided in IC 27-9-3-30.1. The reinsurance agreement may provide that the domiciliary liquidator of an insolvent ceding insurer shall give written notice to an assuming insurer of the pendency of a claim against the ceding insurer on the contract reinsured within a reasonable time after the claim is filed in the liquidation proceeding. During the pendency of the claim, any assuming insurer may investigate the claim and interpose in the proceeding where the claim is to be adjudicated, at the assuming insurer's expense, any defenses that the assuming insurer considers available to the ceding insurer or the liquidator. If two (2) or more assuming insurers are involved in the same claim and a majority in interest elect to interpose a defense to the claim, the expense must be apportioned under the terms of the reinsurance agreement as though the expense had been incurred by the ceding insurer.
As added by P.L.116-1994, SEC.54. Amended by P.L.233-1999, SEC.7.

IC 27-6-10-8
Assuming insurer licensed to transact insurance or reinsurance
    
Sec. 8. As provided in section 7 of this chapter, credit for reinsurance shall be allowed a domestic ceding insurer when the reinsurance is ceded to an assuming insurer that is licensed to transact insurance or reinsurance in Indiana.
As added by P.L.116-1994, SEC.54.

IC 27-6-10-9
Assuming insurer is accredited reinsurer; revocation of accreditation
    
Sec. 9. As provided in section 7 of this chapter, credit for reinsurance shall be allowed a domestic ceding insurer when the reinsurance is ceded to an assuming insurer that is an accredited reinsurer in Indiana. No credit shall be allowed a domestic ceding insurer if the assuming insurer's accreditation has been revoked by the commissioner after notice and hearing.
As added by P.L.116-1994, SEC.54.

IC 27-6-10-10
Assuming insurers domiciled and licensed in another state
    
Sec. 10. As provided in section 7 of this chapter, credit shall be allowed a domestic ceding insurer when the reinsurance is ceded to an assuming insurer:
        (1) that:
            (A) is domiciled and licensed in; or
            (B) in the case of a United States branch of an alien company (as defined in IC 27-1-2-3), is entered through;
        a state that employs standards regarding credit for reinsurance substantially similar to those applicable under this chapter;         (2) that:
            (A) maintains a surplus as regards policyholders in an amount not less than twenty million dollars ($20,000,000); and
            (B) submits to the authority of Indiana to examine the insurer's books and records;
        provided, however, that the requirement of clause (A) does not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system; and
        (3) that complies with section 12 of this chapter.
As added by P.L.116-1994, SEC.54.

IC 27-6-10-11
Assuming insurer maintaining a trust fund in a qualified United States financial institution; report on sufficiency of fund; form and content of trust
    
Sec. 11. (a) As provided in section 7 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 policyholders and 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 National Association of Insurance Commissioners' annual statement form. A trust maintained under this section shall comply with the provisions of this section.
    (b) A trust shall comply with the following:
        (1) In the case of a trust of a single assuming insurer:
            (A) the trust shall consist of a trusteed account representing the assuming insurer's liabilities attributable to business written in the United States; and
            (B) the assuming insurer shall maintain a trusteed surplus of not less than twenty million dollars ($20,000,000).
        (2) In the case of a trust of a group including incorporated and individual unincorporated underwriters that are an assuming insurer:
            (A) the trust shall consist of a trusteed account representing the liabilities of the group attributable to business written in the United States;
            (B) the group shall maintain 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; and
            (C) 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 solvency regulation and control by the group's domiciliary regulator as are the unincorporated members.
        The group shall make available to the commissioner an annual certification of the solvency of each underwriter by the domiciliary regulator of the group and its independent public accountants.
        (3) In the case of a trust of a group of incorporated insurers under common administration that are an assuming insurer:
            (A) the group:
                (i) shall report annually to the commissioner as required under subsection (a);
                (ii) must have continuously transacted an insurance business outside the United States for at least three (3) years immediately before making application for accreditation;
                (iii) shall submit to Indiana's authority to examine the books and records of the group and bear the expense of the examination;
                (iv) shall have an aggregate policyholders' surplus of ten billion dollars ($10,000,000,000); and
                (v) 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;
            (B) each member of the group shall make available to the commissioner an annual certification of the member's solvency by the member's domiciliary regulator and its independent public accountant; and
            (C) the trust shall be in an amount equal to the several liabilities of the group attributable to business ceded by United States ceding insurers to any member of the group pursuant to reinsurance contracts issued in the name of such group.
    (c) A trust shall be in a form approved by the commissioner.
    (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 trust's United States policyholders and 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 shall have outstanding obligations due under the reinsurance agreements subject to the trust.
    (h) Not later than February 28 of each year the trustees 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 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.

IC 27-6-10-12
Assuming insurers not licensed or accredited in Indiana; disallowance of credits; exception
    
Sec. 12. If an assuming insurer is not licensed or accredited to transact insurance or reinsurance in Indiana, the credit permitted by sections 10 and 11 of this chapter shall not be allowed unless the assuming insurer agrees in the reinsurance agreements to the following:
        (1) That in the event of the failure of the assuming insurer to perform the assuming insurer's obligations under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding insurer, shall:
            (A) submit to the jurisdiction of any court with jurisdiction in any state of the United States;
            (B) comply with all requirements necessary to give the court described in clause (A) jurisdiction; and
            (C) abide by the final decision of the court or of any appellate court in the event of an appeal; and
        (2) To designate the commissioner or an attorney licensed in, and having offices in, Indiana as its true and lawful attorney upon whom may be served any lawful process in any action, suit, or proceeding instituted by or on behalf of the ceding company.
This section is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if such an obligation is created in the agreement.
As added by P.L.116-1994, SEC.54.

IC 27-6-10-13
Assuming insurer failing to meet requirements of IC 27-6-10-8 through IC 27-6-10-11; insurance of risks jurisdiction
    
Sec. 13. Credit shall be allowed to a domestic ceding insurer when the reinsurance is ceded to an assuming insurer not meeting the requirements of sections 8, 9, 10, or 11 but only with respect to the insurance of risks located in jurisdictions where such reinsurance is required by applicable law or regulation of that jurisdiction.
As added by P.L.116-1994, SEC.54.

IC 27-6-10-14
Reduction from liability for reinsurance ceded to assuming insurer not meeting statutory requirements; amount; security      Sec. 14. (a) A reduction from liability for the reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of section 8, 9, 10, 11, 12, or 13 of this chapter shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer.
    (b) The reduction permitted under subsection (a) shall be in the amount of funds held by or on behalf of the ceding insurer under a reinsurance contract with the assuming insurer as security for the payment of obligations thereunder. The security must be held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer. A reduction under this section is permitted in the amounts held by or on behalf of the ceding insurer in a trust for the ceding insurer held in a qualified United States financial institution (as defined in section 6 of this chapter).
    (c) The security described under subsection (b) may be in the following forms:
        (1) Cash.
        (2) Securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners and qualifying as admitted assets.
        (3) Clean, irrevocable, unconditional letters of credit issued or confirmed by a qualified United States financial institution (as defined in section 5 of this chapter) not later than December 31 in 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 that meet 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 the earlier of their expiration, extension, renewal, modification, or amendment.
        (4) Any other form of security acceptable to the commissioner.
As added by P.L.116-1994, SEC.54. Amended by P.L.2-1995, SEC.105.

IC 27-6-10-15
Implementation of chapter
    
Sec. 15. The commissioner may adopt rules under IC 4-22-2 to implement this chapter.
As added by P.L.116-1994, SEC.54.