3 Alaska Admin. Code § 21.659

Current through September 25, 2024

Section 3 AAC 21.659 - Reciprocal Jurisdictions

(a) Under AS 21.12.020(a)(6), the director will allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that is licensed to write reinsurance by, and has its head office or is domiciled in, a reciprocal jurisdiction, and that meets the other requirements of this section.

(b) In addition to a jurisdiction within the meaning given in AS 21.12.020(i)(2)(A) and (B) and designated by the directed under (d) of this section, a reciprocal jurisdiction includes a qualified jurisdiction as determined by the director under AS 21.12.020(a)(5)(C) and 3 AAC 21.694(n) - (q) that is not otherwise described in AS 21.12.020(i)(2)(A) or (B), that is designated by the director under (d) of this section and that director determines meets all of the following additional requirements:

(1) provides that an insurer that has its head office or is domiciled in a qualified jurisdiction shall receive credit for reinsurance ceded to a United States domiciled assuming insurer in the same manner as credit for reinsurance is received for reinsurance assumed by insurers domiciled in a qualified jurisdiction;

(2) does not require United States domiciled assuming insurer to establish or maintain a local presence as a condition for entering into a reinsurance agreement with a ceding insurer subject to regulation by the non United States. jurisdiction or as a condition to allow the ceding insurer to recognize credit for the reinsurance;

(3) recognizes the United States regulatory approach to group supervision and group capital, by providing written confirmation by a competent regulatory authority, in a qualified jurisdiction, that insurers and insurance groups that are domiciled or maintain their headquarters in this state or another jurisdiction accredited by the National Association of Insurance Commissioners shall be subject only to worldwide prudential insurance group supervision including worldwide group governance, solvency and capital, and reporting, as applicable, by the director or the insurance supervisory official of the domiciliary state and will not be subject to group supervision at the level of the worldwide parent undertaking of the insurance or reinsurance group by the qualified jurisdiction; and

(4) provides written confirmation by a competent regulatory authority m a qualified jurisdiction that information regarding insurers and their parent, subsidiary, or affiliated entities, if applicable, shall be provided to the director in accordance with a memorandum of understanding or similar document between the director and a qualified jurisdiction, including the International Association of Insurance Supervisors Multilateral Memorandum of Understanding or other multilateral memoranda of understanding coordinated by the National Association of Insurance Commissioner.

(c) Credit shall be allowed when the reinsurance is ceded from an insurer domiciled in this state to an assuming insurer meeting each of the following conditions:

(1) the assuming insurer must be licensed to transact reinsurance by, and have its head office or be domiciled in, a reciprocal jurisdiction;

(2) the assuming insurer must have and maintain on an ongoing basis minimum capital and surplus, or its equivalent, calculated on at least an annual basis as of the preceding December 31 or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, and confirmed as set out (7) of this subsection according to the methodology of its domiciliary jurisdiction, in the following amounts;

(A) no less than $250,000,000; or

(B) if the assuming insurer is an association, including incorporated and individual unincorporated underwriters;

(i) minimum capital and surplus equivalents, net of liabilities, or own funds of the equivalent of at least $250,000,000; and

(ii) a central fund containing a balance of the equivalent of at least $250,000,000;

(3) the assuming insurer must have and maintain on an ongoing basis a minimum solvency or capital ratio, as applicable, as follows:

(A) if the assuming insurer has its head office or is domiciled in a reciprocal jurisdiction within the meaning given in AS 21.12.020(I)(2)(A) ratio specified in the applicable covered agreement;

(B) if the assuming insurer is domiciled in a reciprocal jurisdiction within the meaning given in AS 21.12.020(i)(2)(B), a risk based capital ratio of 300 percent of the authorized control level, calculated in accordance with the formula developed by the NAIC; or

(C) if the assuming insurer is domiciled in a reciprocal jurisdiction within the meaning given in AS 21.12.020(i)(2)(C) after consultation with the reciprocal jurisdiction and considering recommendations published through the NAIC Committee Process of the National Association of Insurance Commissioner solvency or capital ratio as the director determines to be an effective measure of solvency;

(4) the assuming insurer must agree to and provide adequate assurance, in the form of a properly executed Form RJ-1, of its agreement to the following;

(A) the assuming insurer must agree to provide prompt written notice and explanation to the director if it falls below the minimum requirements set out in (2) OR (3)of this subsection or if a regulatory action is taken against it for serious noncompliance with applicable law;

(B) the assuming insurer must consent in writing to the jurisdiction of the courts of this state and to the appointment of the director as agent for service of process The director may also require that consent be provided and included in each reinsurance agreement under the director's jurisdiction Nothing in this subparagraph limit or alter the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent the agreements are unenforceable under applicable insolvency or delinquency laws;

(C) the assuming insurer must consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer, that have been declared enforceable in the territory where the judgment was obtained;

(D) each reinsurance agreement must include a provision requiring the assuming insurer to provide security in an amount equal to 100 percent of the assuming insurer's liabilities attributable to reinsurance ceded under that agreement if the assuming insurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its legal successor on behalf of its estate, if applicable;

(E) the assuming insurer must confirm that it is not presently participating in a solvent scheme of arrangement, that involves this state s ceding insurers, and agrees to notify the ceding insurer and the director and to provide 100 percent security to the ceding insurer consistent with the terms of the scheme, should the assuming insurer enter into a solvent scheme of arrangement The security must be be in a form consistent with the provisions of AS 21.12.020(a)(5) and (c) 3 AAC .662,3 AAC 21.664, 3 AAC 21.670 and 3 AAC 21.685; In this subparagraph solvent scheme of arrangement" means a foreign or alien statutory or regulatory compromise procedure; subject to requisite majority creditor approval and judicial A sanction in the assuming insurer's home jurisdiction either to finally commute liabilities of duly noticed classed members or creditors of a solvent debtor, or to reorganize or restructure the debts and obligations of a solvent debtor on a final basis and (ii) that may be subject to judicial recognition and enforcement of the arrangement by a governing authority outside the ceding insurer's home jurisdiction; and

(F) the assuming insurer must agree in writing to meet the applicable information filing requirements as set out in (5) of this subsection;

(5) the assuming insurer or its legal successor must provide, if requested by the director, on behalf of itself and its legal predecessors, the following documentation to the director;

(A) for the two years preceding entry into the reinsurance agreement and on an annual basis thereafter, the assuming insurer's annual audited financial statements, in accordance with the applicable law of the jurisdiction of its head office or domiciliary jurisdiction, as applicable, including the external audit report;

(B) for the two years preceding entry into the reinsurance agreement, the solvency and financial condition report or actuarial opinion, if filed with the assuming insurer's supervisor;

(C) before entry into the reinsurance agreement and not more than semiannually thereafter, an updated list of all disputed and overdue reinsurance claims outstanding for 90 days or more, regarding reinsurance assumed from ceding insurers domiciled in the United States; and

(D) before entry into the reinsurance agreement and not more than semiannually thereafter, information regarding the assuming insurer's assumed reinsurance by ceding insurer, ceded reinsurance by the assuming insurer, and reinsurance recoverable on paid and unpaid losses by the assuming insurer to allow for the evaluation of the criteria set out in (6) of this subsection;

(6) the assuming insurer must maintain a practice of prompt payment of claims under reinsurance agreement the lack of prompt payment is be evidenced if one or more of following criteria are met:

(A) more than 15 percent of the reinsurance recoverables from the assuming insurer are overdue and in dispute as reported to the director;

(B) more than 15 percent of the assuming insurer's ceding insurers or reinsurers have overdue reinsurance recoverable on paid losses of 90 days or more that are not in dispute and that exceed for each ceding insurer or reinsurer $100,000, or as otherwise specified in a covered agreement;

(C) the aggregate amount of reinsurance recoverable on paid losses that are not in dispute, but are overdue by 90 days or more, exceeds $50,000,000, or as otherwise specified in a covered agreement

(7) the assuming insurer's supervisory authority must confirm to the director on an annual basis that the assuming insurer complies with the requirements set out in (2) and (3) of this subsection and

(8) nothing in this subsection precludes an assuming insurer from providing the director with information on a voluntary basis.

(d) The director will timely create and publish a list of reciprocal jurisdictions considering the following:

(1) the director's list will include reciprocal jurisdiction within the meaning given in AS 21.12.020(I)(2)(A) and (B) and will consider other reciprocal jurisdiction included on the National Association of Insurance Commissioner list of reciprocal jurisdiction. The director may approve a jurisdiction that does not appear on the list of reciprocal jurisdictions as provided by applicable law, regulation, or in accordance with criteria published through the Committee Process of the National Association of Insurance Commissioner and

(2) the director may remove a jurisdiction from the list of reciprocal jurisdictions upon a determination that the jurisdiction no longer meets one or more of the requirements of a reciprocal jurisdiction, as provided by applicable law, regulation, or in accordance with a process published through the of the National Association of Insurance Commissioner Committee Process, except that the director will not remove from the list a reciprocal jurisdiction within the meaning given in AS 21.12.020(i)(2)(A) and (B) upon removal of a reciprocal jurisdiction from this list credit for reinsurance ceded to an assuming insurer domiciled in that jurisdiction will be allowed, if otherwise allowed under AS 21.12.020 or 3 AAC 21.060- 3 AAC 21.675.

(e) The director shall timely create and publish a list of assuming insurers that have satisfied the following conditions set out in this section and to which cessions will be granted credit in accordance with this section:

(1) if a jurisdiction accredited by the National Association of Insurance Commissioners (NAIC) has determined that the conditions set out in (c) of this section have been met, the director may defer to that jurisdiction's determination and add an assuming insurer to the list of assuming insurers to which cessions shall be granted credit in accordance with this subsection, if

(A) the director accepts financial documentation filed with the NAIC or another jurisdiction accredited by the NAIC in satisfaction of the requirements of (c) of this section; or

(B) upon initial eligibility, the assuming insurer submits the information to the director required under AS 21.12.020(a)(6)(D) and complies with any additional requirements that the director may impose by regulations adopted under AS 44.62 (Administrative Procedure Act), except to the extent that they conflict with an applicable covered agreement; and

(2) when requesting that the director defer to another NAIC accredited jurisdiction's determination, an assuming insurer must submit a properly executed Form RJ-1 and additional information as the director may require; the director will notify other states through the of the National Association of Insurance Commissioner Committee process and provide relevant information with respect to the determination of eligibility.

(f) If the director determines that an assuming insurer no longer meets one or more of the requirements under this section, the director may revoke or suspend the eligibility of the assuming insurer for recognition under AS 21.12.020(a)(6) and under this section In accordance with AS 21.12.020(h),a(1) While an assuming insurer's eligibility is suspended, a reinsurance agreement issued, amended, or renewed after the effective date of the suspension does not qualify for credit except to the extent that the assuming insurer's obligations under the contract are secured in accordance with AS 21.12.020(c) and 3 AAC 21.66; and (2) an assuming insurer's eligibility is revoked, a credit for reinsurance may not be granted after the effective date of the revocation with respect to any reinsurance agreement entered into by the assuming insurer, including a reinsurance agreement entered into before the date of revocation, except to the extent that the assuming insurer's obligations under the contract are secured in a form acceptable to the director and consistent with AS 21.12.020(c) and 3 AAC 21.662.

(g) Before denying statement credit or imposing a requirement to post security with respect to (f) of this section, or adopting similar requirements that will have substantially the same regulatory effect as security, the director

(1) will communicate with the ceding insurer, the assuming insurer, and the assuming A insurer's supervisory authority that the assuming insurer no longer satisfies one of the conditions listed in (c) of this section;

(2) provide the assuming insurer with 30 days from the date of initial communication to submit a plan to remedy the defect, and 90 days from the date of the initial communication to remedy the ./I defect, except in exceptional circumstances in which a shorter period is necessary for policyholder and other consumer protections;

(3) May impose the requirements as set out in this subsection after the expiration of 90 days or less, as set out in (2) of this subsection, if the director determines that no or insufficient action was taken by the assuming insurer and

(4) provide a written explanation to the assuming insurer of the requirements set A out in this subsection.

(h) If subject to a legal process of rehabilitation, liquidation, or conservation, as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring that the assuming liabilities.

(i) Nothing in AS 21.12.020(h) limits or in any way alters the capacity of parties to any reinsurance agreement to renegotiate the agreement.

3 AAC 21.659

Eff. 12/23/2021,Register 240, January 2021

Eff. 8/23/2023, Register 247, October 2023

Authority:AS 21.06.090

AS 21.12.020