Section 3 AAC 21.660 - Authorized assuming insurer maintaining a trust fund(a) The director shall allow credit for reinsurance ceded by a domestic insurer to an authorized assuming insurer that maintains a trust fund on or before the as of date of the ceding insurer's statutory financial statement. The director shall allow this credit for as long as credit for reinsurance is claimed by the domestic insurer and the trust fund is maintained in an amount and location as required under AS 21.12.020(a)(4). The assuming insurer shall report annually to the director substantially the same information as that required to be reported on the National Association of Insurance Commissioners annual statement form by licensed insurers, to enable the director to determine the sufficiency of the trust fund.(b) The trust fund for a single assuming insurer shall consist of funds in trust in an amount not less than the assuming insurer's liabilities attributable to reinsurance ceded by United States domiciled insurers. In addition, the assuming insurer shall maintain a trusteed surplus of not less than $20,000,000, except as provided in (c) of this section.(c) At any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least three full years the insurance regulatory official with principal regulatory oversight of the trust may authorize a reduction in the required trusteed surplus, but only after a finding, based on an assessment of the risk, that the new required surplus level is adequate for the protection of United States ceding insurers, policyholders, and claimants in light of reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and shall consider all material risk factors, including when applicable the lines of business involved, the stability of the incurred loss estimates and the effect of the surplus requirements on the assuming insurer's liquidity or solvency. The minimum required trusteed surplus may not be reduced to an amount less than 30 percent of the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers covered by the trust.(d) The trust fund for a group including incorporated and individual unincorporated underwriters shall consist of: (1) for reinsurance ceded under reinsurance agreements with an inception, amendment, or renewal date on or after January 1, 1993, funds in trust in an amount not less than the respective underwriters' several liabilities attributable to business ceded by United States domiciled ceding insurers to any underwriter of the group;(2) for reinsurance ceded under reinsurance agreements with an inception date on or before December 31, 1992, and not amended or renewed after that date, notwithstanding the other provisions of this regulation, funds in trust in an amount not less than the respective underwriters' several insurance and reinsurance liabilities attributable to business written in the United States; and(3) in addition to these trusts, the group shall maintain a trusteed surplus of which $100,000,000 shall be held jointly for the benefit of the United States domiciled ceding insurers of any member of the group for all the years of account.(e) The incorporated members of a group may 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. The group shall, not later than 90 days after its financial statements are due to be filed with the group's domiciliary regulator, provide to the direction (1) an annual certification by the group's domiciliary regulator of the solvency of each underwriter member of the group; or(2) if a certification is unavailable, a financial statement, prepared by independent public accountants, of each underwriter member of the group.(f) The trust fund for a group of incorporated insurers under common administration, whose members possess aggregate policyholders surplus of $10,000,000,000, calculated and reported in substantially the same manner as prescribed by the annual statement instructions and Accounting Practices and Procedures Manual of the National Association of Insurance Commissioners, and which has continuously transacted an insurance business outside the United States for at least three years immediately prior to making application for accreditation, shall (1) consist of funds in trust in an amount not less than the assuming insurers' several liabilities attributable to business ceded by United States domiciled ceding insurers to any members of the group pursuant to reinsurance contracts issued in the name of such group;(2) maintain a joint trusteed surplus of which $100,000,000 shall be held jointly for the benefit of United States domiciled ceding insurers of any member of the group;(3) file a properly executed Form AR-1 as evidence of the submission to this state's authority to examine the books and records of any of its members and shall certify that any member examined will bear the expense of any such examination; and(4) not later than 90 days after the statements are due to be filed with the group's domiciliary regulator, the group shall file with the director an annual certification of each underwriter member's solvency by the member's domiciliary regulators, and financial statements, prepared by independent public accountants, of each underwriter member of the group.(g) Credit for reinsurance may not be granted unless the form of the trust and any amendments to the trust have been approved by either the insurance regulatory official of the state where the trust is domiciled or the insurance regulatory official of another state who, pursuant to the terms of the trust instrument, has accepted responsibility for regulatory oversight of the trust. The form of the trust and any trust amendments must be filed with the director of every state in which the ceding insurer beneficiaries of the trust are domiciled. The trust instrument must provide that (1) contested claims shall be valid and enforceable out of funds in trust to the extent remaining unsatisfied 30 days after entry of the final order of any court of competent jurisdiction in the United States;(2) legal title to the assets of the trust shall be vested in the trustee for the benefit of the grantor's United States ceding insurers, their assigns, and successors in interest;(3) the trust shall be subject to examination as determined by the director;(4) the trust shall remain in effect for as long as the assuming insurer, or any member or former member of a group of insurers, shall have outstanding obligations under reinsurance agreements subject to the trust; and(5) no later than February 28 of each year the trustee of the trust shall report to the director in writing setting forth the balance in the trust and listing the trust's investments at the preceding year-end, and shall certify the date of termination of the trust, if so planned, or certify "that the trust will not expire prior to the following December 31.(h) Notwithstanding any other provisions in the trust instrument, if the trust fund is inadequate because it contains an amount less than the amount required by this section or if the grantor of the trust has been declared insolvent or placed into receivership, rehabilitation, liquidation, or similar proceedings under the laws of its state or country of domicile, the trustee shall comply with an order of the insurance regulatory official with regulatory oversight over the trust or with an order of a court of competent jurisdiction directing the trustee to transfer to the insurance regulatory official with regulatory oversight over the trust or other designated receiver all of the assets of the trust fund. The assets shall be distributed by and claims shall be filed with and valued by the insurance regulatory official with regulatory oversight over the trust in accordance with the laws of the state in which the trust is domiciled applicable to the liquidation of domestic insurance companies. If the insurance regulatory official with regulatory oversight over the trust determines that the assets of the trust fund or any part thereof are not necessary to satisfy the claims of the United States beneficiaries of the trust, the director with regulatory oversight over the trust shall return the assets, or any part thereof, to the trustee for distribution in accordance with the trust agreement. The grantor shall waive any right otherwise available to it under United States law that is inconsistent with this provision.(i) Assets deposited in a trust fund established by an authorized assuming insurer must be valued according to fair market value and may only consist of (1) cash in United States dollars;(2) certificates of deposit issued by a qualified United States financial institution;(3) clean, irrevocable, unconditional letters of credit containing an evergreen clause, issued or confirmed by a qualified United States financial institution; or(4) investments of a type specified in (k) of this section.(j) An investment in or issued by an entity controlling, controlled by, or under common control with either the grantor or beneficiary of the trust fund must not exceed five percent of the total of the trust fund. Not more than 20 percent of the total of the trust fund may be in foreign investments authorized in this section, and not more than 10 percent of the total of the trust fund may be in securities denominated in foreign currencies. A depository receipt denominated in United States dollars and representing rights conferred by a foreign security is classified as a foreign investment denominated in a foreign currency.(k) The trust fund established by an authorized assuming insurer must only contain the following (1) a valid and legally authorized government obligation that is not in default as to principal or interest that is issued, assumed, or guaranteed by (A) the United States or by any agency or instrumentality of the United States;(B) a state of the United States;(C) a territory, possession, or other governmental unit of the United States;(D) an agency or instrumentality of a governmental unit referred to in (B) or (C) of this paragraph, if the obligation is payable by law, as to both principal and interest, from taxes levied or required by law to be levied, or from adequate special revenues pledged or otherwise appropriated, or required by law to be provided for making these payments; the obligation may not be an obligation eligible for investment under this paragraph if the obligation is payable solely out of a special assessment on properties benefited by local improvements; or(E) the government of any other country that is a member of the Organization for Economic Cooperation and Development and whose government obligations are rated high grade investments or the equivalent by a rating agency recognized by the Securities Valuation Office of the National Association of Insurance Commissioners;(2) an obligation that (A) is issued in the United States by a solvent United States institution, other than an insurance company, or that is assumed or guaranteed by that institution; or a non-United States market by a solvent United States institution, other than an insurance company, and that is dollar-denominated;(B) is not in default as to principal or interest; and(C) either (i) is rated a high-grade investment or the equivalent by a rating agency recognized by the securities valuation office or, if not rated, is similar in structure and other material respects to other obligations of the same institution that are rated equivalent to a high-grade investment; or(ii) is insured by at least one authorized insurer that is licensed to insure obligations in this state if, after considering the insurance, a rating agency recognized by the securities valuation office rates the obligation a high-grade investment or the equivalent; for purposes of this sub-subparagraph, an authorized insurer may not be the investing insurer or a parent, subsidiary, or affiliate of the investing insurer; or (iii) has been designated as Class One or Class Two by the Securities Valuation Office of the National Association of Insurance Commissioners;(3) an obligation issued, assumed, or guaranteed by a solvent non-United States institution chartered in a country that is a member of the Organization for Economic Cooperation and Development or obligations of United States corporations issued in a non-United States currency, provided that in either case the obligations are rated A or higher, or the equivalent, by a rating agency recognized by the Securities Valuation Office of the National Association of Insurance Commissioners;(4) an equity investment in common shares or a partnership interest as described in (A) or (B) of this paragraph, if the investment in, or loan upon, any one institution's outstanding equity interests does not exceed one percent of the assets of the trust fund, or if the cost of the investment in equity interest made under this paragraph, when added to the aggregate cost of other investments in equity interest then held under this paragraph, does not exceed 10 percent of the assets of the trust fund; the equity investment may be made in (A) a solvent United States institution if the(i) obligation and preferred shares of the institution, if any, are eligible as investments under this subsection; and(ii) equity interests of the institution, except an insurance company, are registered on a national securities exchange registered under 15 U.S.C. 78e - 78f, sees. 5-6 of the Securities Act of 1934, and price quotations are furnished through a nationwide automated quotations system approved by the Securities and Exchange Commission or the National Association of Securities Dealers; or (B) a solvent institution organized under the laws of a member country of the Organization for Economic Cooperation and Development if the (i) obligation is rated a high-grade investment or the equivalent by a rating agency recognized by the Securities Valuation Office of the National Association of Insurance Commissioners; and(ii) equity interests of the institution are registered on a securities exchange regulated by the government of a member country of the Organization for Economic Cooperation and Development;(5) if a high-grade investment obligation or the equivalent by a rating agency recognized by the securities valuation office, an obligation issued, assumed, or guaranteed by a multinational development bank; for purposes of this paragraph, "multinational development bank" includes (A) International Bank for Reconstruction and Development;(B) European Bank for Reconstruction and Development;(C) Inter-American Development Bank;(D) Asian Development Bank;(E) African Development Bank; and(F) International Finance Corporation;(6) a security of an investment company registered under 1 5 U.S.C. 80a-1 - 80a-64, Investment Company Act of 1940, if the (A) investment company invests at least 90 percent of its assets in the types of securities that qualify as an investment (i) under (1), (2), or (3) of this subsection or invests in securities that are determined by the director to be substantially similar; or(ii) under (4)(A) of this subsection; and(B) total investment in securities qualifying (i) under (A)(i) of this paragraph does not exceed 10 percent of the assets of the trust fund and the total investment in qualifying investment companies does not exceed 25 percent of the assets of the trust fund; and(ii) under (A)(ii) of this paragraph does not exceed five percent of the assets of the trust fund and the total investment in qualifying investment companies are included when calculating the permissible aggregate value of equity interests under (4)(A) of this subsection; or(7) a letter of credit that has the right and obligation of the trustee in a binding agreement, as approved by the director, to immediately draw down the full amount of the letter of credit and hold the proceeds in trust for the beneficiary of the trust fund if the letter of credit will otherwise expire without being renewed or replaced. (l) An investment made under (k)(1), (2), or (3) of this section may not exceed (1) five percent of the trust fund for the total of investments in or loans upon the obligations of an institution other than an institution that issues mortgage-related securities;(2) five percent of the trust fund for an investment in any one mortgage-related security;(3) 25 percent of the trust fund for the total of investments in mortgage-related security; or(4) two percent of the trust fund for preferred or guaranteed shares issued or guaranteed by a solvent United States institution; in addition, an investment in preferred or guaranteed shares issued or guaranteed by a solvent United States institution is permitted only if all obligations of the institution are eligible as investments under (k)(2)(C)(i) or (iii) of this section.(m) As used in this section: (1) "mortgage-related security" means an obligation that is rated AA or higher, or the equivalent, by a securities rating agency recognized by the Securities Valuation Office of the National Association of Insurance Commissioners and that either (A) represents ownership of one or more promissory notes or certificates of interest or participation in the notes, including any rights designed to assure servicing of, or the receipt or timeliness of receipt by the holders of the notes, certificates, or participation of amounts payable under, the notes, certificates, or participation, that (i) are directly secured by a first lien on a single parcel of real estate, including stock allocated to a dwelling unit in a residential cooperative housing corporation, upon which is located a dwelling or mixed residential and commercial structure, or on a residential manufactured home as defined in 42 U.S.C. Section 5402(6), whether the manufactured home is considered real or personal property under the laws of the state in which it is located; and (ii) were originated by a savings and loan association, savings bank, commercial bank, credit union, insurance company, or similar institution that is supervised and examined by a federal or state housing authority, or by a mortgagee approved by the Secretary of Housing and Urban Development under 12 U.S.C. sections 1709 and 1715 -b, or, where the notes involve a lien on the manufactured home, by an institution or by a financial institution approved for insurance by the Secretary of Housing and Urban Development pursuant to 12 U.S.C section 1703; or(B) is secured by one or more promissory notes, certificates of deposit or participations in the notes, with or without recourse to the insurer of the notes, and, by its terms, provides for payments of principal in relation to payments, or reasonable projections of payments, or notes meeting the requirements of items (A)(i) and (A)(ii) of this subsection;(2) "promissory note," when used in connection with a manufactured home, include a loan an advance or a credit sale as evidenced by a retail installment sales contract or other instrument.Eff. 11/25/94, Register 132; am 11/21/2004, Register 172; am 12/26/2019, Register 232, January 2020 Authority:AS 21.06.090
AS 21.12.020