New Hampshire recently amended its credit for reinsurance laws for domestic ceding insurers, revising RSA § 405:47 as follows:
“No credit under this section shall be allowed, as an admitted asset or deduction from liability, to any ceding insurer for reinsurance, unless the reinsurance contract provides, in substance, that in the event of the insolvency of the ceding insurer, the reinsurance shall be payable by the assuming insurer on the basis of the claims allowed against the ceding insurer in the insolvency proceedings, under contract or contracts reinsured, without diminution because of the insolvency of the ceding insurer…”
Specific exceptions to the above include so-called cut-through arrangements (where the reinsurer/assuming insurer assumes a domestic cedent’s policy obligations to direct insured(s)) or where the reinsurance agreement expressly provides for another payee of such reinsurance in the event of the insolvency of the cedent. The revised statute further provides that a reinsurance contract may require that the “domiciliary liquidator or receiver” of any insolvent cedent provide written notice to the reinsurer within a specific or reasonable period of time of any claim implicating the reinsurance that is filed in court or with the liquidator/receiver. If, during the pendency of the claim, a reinsurer seeks to investigate the claim and interpose certain defenses on the cedent’s behalf, the reinsurer can intervene in the proceeding in which the claim is pending and assert certain defenses unless barred by the applicable reinsurance agreement. The expenses incurred by the reinsurer in these situations are payable up to the amount of the expenses or amount of the “benefit produced”, whichever is less, as expenses of the receivership. The revised statute has an effective date of July 26, 2016. N.H. HB 1403, Ch. 144, May 27, 2016.