The Connecticut Insurance Department (the “Department”) issued Bulletin No. FS-25 (available here) on March 1, 2013 (the “Bulletin”), allowing insurers to apply to become certified reinsurers in Connecticut pursuant to the Credit for Reinsurance law, which was amended effective October 1, 2012. Connecticut is one of 10 states that now permit credit for reinsurance for amounts ceded to or assumed by a certified reinsurer. The other nine states are: California, Delaware, Georgia, Indiana, Louisiana, New Jersey, New York, Pennsylvania and Virginia.
The October 1, 2012 amendments to Connecticut’s Credit for Reinsurance Law reflect the amendments to the NAIC Credit for Reinsurance Model Law, which create the category of “certified” reinsurers that are eligible to post less than 100% collateral – and allow ceding insurers to receive reinsurance credit for amounts ceded to or assumed by such reinsurers. The Department has proposed amendments to the Connecticut Credit for Reinsurance regulations to implement the amended statutory provisions. The proposed amended regulations must be approved by the Legislative Regulation Review Committee of the General Assembly and filed with the Secretary of State before becoming operational. However, the Bulletin provides that while the approval of the proposed amended regulations is pending, reinsurers may apply to become certified reinsurers by meeting the statutory requirements and the requirements in the proposed amended regulations. To be eligible for certification, a reinsurer must:
- Be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction, as identified by the Commissioner;
- Maintain minimum capital and surplus requirements (no less than $250 million) or their equivalent in an amount prescribed by the Commissioner pursuant to the regulations concerning credit for reinsurance;
Maintain financial strength ratings from two or more rating agencies that are deemed acceptable by the Commissioner pursuant to the amended regulations concerning credit for reinsurance;
- Standard & Poor’s;
- Moody’s Investors Service;
- Fitch Ratings;
- A.M. Best Company; or
- Any other nationally recognized statistical rating organization
- Agree to submit to the jurisdiction of the State of Connecticut and appoint the Commissioner as its agent for service of process in the state;
- Agree to provide security for 100% of such insurer’s liabilities attributable to reinsurance ceded by domestic and foreign ceding insurers if the assuming insurer resists enforcement of a final judgment entered by a court in Connecticut or another state;
- Agree in the trust agreement, if the assuming insurer chooses to secure its obligations incurred under reinsurance agreements issued or renewed as a certified reinsurer in the form of a multi-beneficiary trust, that such assuming insurer shall, upon termination of any trust account of such trust, fund any deficiency of any other trust account of such trust out of the remaining surplus of the trust;
- Agree to meet applicable filing requirements as prescribed by the Commissioner;
- Comply with any other requirements deemed necessary for certification. The Bulletin provides a checklist, which should be used to complete an application for reinsurer certification.
The Bulletin provides a checklist, which should be used to complete an application for reinsurer certification.