§ 58-7-26. Asset or reduction from liability for reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of G.S. 58-7-21.
§ 58‑7‑26. Assetor reduction from liability for reinsurance ceded by a domestic insurer to anassuming insurer not meeting the requirements of G.S. 58‑7‑21.
(a) An asset or areduction from liability for reinsurance ceded by a domestic insurer to an assuminginsurer not meeting the requirements of G.S. 58‑7‑21 shall beallowed in an amount not exceeding the liabilities carried by the cedinginsurer. The reduction shall be in the amount of funds held by or on behalf ofthe ceding insurer, including funds held in trust for the ceding insurer, undera reinsurance contract with the assuming insurer as security for the payment ofobligations thereunder, if the security is held in the United States subject towithdrawal solely by, and under the exclusive control of, the ceding insurer;or, in the case of a trust, held in a qualified United States financialinstitution as defined in subsection (c) of this section. This security may bein the form of:
(1) Cash;
(2) Securities that arelisted by the Securities Valuation Office of the NAIC and qualifying asadmitted assets;
(3) Clean, irrevocable,unconditional letters of credit, issued or confirmed by a qualified UnitedStates financial institution, as defined in subsection (b) of this section,effective no later than December 31 of the year for which the filing is beingmade, and in the possession of, or in trust for, the ceding company on orbefore the filing date of its annual statement. Letters of credit meetingapplicable 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 issueracceptability, continue to be acceptable as security until their expiration,extension, renewal, modification or amendment, whichever occurs first; or
(4) Any other form ofsecurity acceptable to the Commissioner.
(b) For purposes ofsubdivision (a)(3) of this section, a "qualified United States financialinstitution" means an institution that:
(1) Is organized, or inthe case of a United States office of a foreign banking organization licensed,under the laws of the United States or any of its states;
(2) Is regulated,supervised, and examined by United States federal or state authorities havingregulatory authority over banks and trust companies; and
(3) Has been determinedby either the Commissioner or the Securities Valuation Office of the NAIC tomeet such standards of financial condition and standing as are considerednecessary and appropriate to regulate the quality of financial institutionswhose letters of credit will be acceptable to the Commissioner.
(c) A "qualifiedUnited States financial institution" means, for purposes of thoseprovisions of this section specifying those institutions that are eligible toact as a fiduciary of a trust, an institution that:
(1) Is organized, or inthe case of a United States branch or agency office of a foreign bankingorganization licensed, under the laws of the United States or any of its statesand has been granted authority to operate with fiduciary powers; and
(2) Is regulated,supervised, and examined by federal or state authorities having regulatoryauthority over banks and trust companies.
(d) This sectionapplies to all reinsurance cessions made on or after January 1, 1992, underreinsurance agreements that have an inception, anniversary, or renewal date onor after January 1, 1992. (1991, c. 681, s. 22; 2001‑223, s. 3.2; 2006‑105,s. 1.3.)