26-5-112. Credit allowed a domestic ceding insurer.
(a) Except as provided in W.S. 26-5-113, and in addition to any rules adopted by the commissioner pursuant to W.S. 26-5-116 relating to the valuation of assets or reserve credits, the amount and forms of security supporting reinsurance arrangements and the circumstances pursuant to which credit will be reduced or eliminated, credit for reinsurance shall be allowed a domestic ceding insurer as either an asset or a deduction from liability on account of reinsurance ceded only if the reinsurer meets the requirements of any one (1) of the following paragraphs:
(i) The reinsurance is ceded to an assuming insurer which is licensed to transact insurance in this state;
(ii) The reinsurance is ceded to an assuming insurer which is accredited as a reinsurer in this state and whose accreditation has not been revoked by the commissioner. An accredited reinsurer is one which:
(A) Files with the commissioner evidence of its submission to this state's jurisdiction;
(B) Submits to this state's authority to examine its books and records;
(C) Is licensed to transact insurance or reinsurance in at least one (1) state, or in the case of a United States branch of an alien assuming insurer is entered through and licensed to transact insurance or reinsurance in at least one (1) state;
(D) Files annually with the commissioner a copy of its annual statement filed with the insurance department of its state of domicile and a copy of its most recent audited financial statement; and
(I) Repealed by Laws 2017, ch. 29, § 2.
(II) Repealed by Laws 2017, ch. 29, § 2.
(E) Demonstrates to the satisfaction of the commissioner that it has adequate financial capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from domestic insurers. An assuming insurer is deemed to meet this requirement as of the time of its application if it maintains a surplus as regards policyholders in an amount not less than twenty million dollars ($20,000,000.00) and its accreditation has not been denied by the commissioner within ninety (90) days after submission of its application.
(iii) The reinsurance is ceded to an assuming insurer which is domiciled and licensed in, or in the case of a United States branch of an alien assuming insurer is entered through and licensed in, a state which employs standards regarding credit for reinsurance which meet or exceed those applicable under this section and the assuming insurer or United States branch of an alien assuming insurer:
(A) Maintains a surplus as regards policyholders in an amount not less than twenty million dollars ($20,000,000.00), provided however that this requirement does not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system; and
(B) Submits to the authority of this state to examine its books and records.
(iv) The reinsurance is ceded to an assuming insurer not meeting the requirements of paragraphs (i) through (iii) or (v) through (vii) of this subsection but only with respect to the insurance of risks located in jurisdictions where such reinsurance is required by applicable law or regulation of that jurisdiction;
(v) The reinsurance is ceded to an assuming insurer which maintains a trust fund in a qualified United States financial institution, as defined in W.S. 26-5-114(b), for the payment of the valid claims of its United States policyholders and ceding insurers, their assigns and successors in interest. The assuming insurer shall report annually to the commissioner information substantially the same as that required to be reported on the NAIC annual statement form by licensed insurers to enable the commissioner to determine the sufficiency of the trust fund. The assuming insurer shall submit to examination of its books and records by the commissioner and bear the expense of examination. In the case of:
(A) A single assuming insurer, the trust shall consist of a trusteed account representing the assuming insurer's liabilities attributable to business written in the United States and, in addition, the assuming insurer shall maintain a trusteed surplus of not less than twenty million dollars ($20,000,000.00). At any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least three (3) years, the commissioner 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 thirty percent (30%) of the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers covered by the trust;
(B) A group including incorporated and individual unincorporated underwriters, the trust shall consist of a trusteed account representing the group's liabilities attributable to business written in the United States and, in addition:
(I) The group shall maintain a trusteed surplus of which one hundred million dollars ($100,000,000.00) shall be held jointly for the benefit of United States ceding insurers of any member of the group;
(II) Within ninety (90) days after its financial statements are due, the group shall make available to the commissioner an annual certification of the solvency of each underwriter by the group's domiciliary regulator and its independent public accountants; and
(III) The incorporated members of the group shall not be engaged in any business other than underwriting as a member of the group and shall be subject to the same level of solvency regulation and control by the group's domiciliary regulator as are the unincorporated members.
(vi) The reinsurance is ceded to an assuming insurer that is certified by the commissioner as a reinsurer in this state and secures its obligations in accordance with the following provisions:
(A) Prior to certification by the commissioner, the assuming insurer must be eligible for certification. In order to be eligible for certification, the assuming insurer shall:
(I) Be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction, as determined by the commissioner pursuant to subparagraph (C) of this paragraph;
(II) Maintain minimum capital and surplus, or its equivalent, in an amount to be determined by rule and regulation of the commissioner;
(III) Maintain financial strength ratings from two (2) or more rating agencies deemed acceptable by rule and regulation of the commissioner;
(IV) Agree to submit to the jurisdiction of this state, appoint the commissioner as its agent for service of process in this state and agree to provide security for one hundred percent (100%) of the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers if it resists enforcement of a final United States judgment;
(V) Agree to meet applicable information filing requirements as determined by the commissioner, both with respect to an initial application for certification and on an ongoing basis; and
(VI) Satisfy any other requirements for certification deemed necessary by the commissioner.
(B) Prior to certification by the commissioner, an association including incorporated and individual unincorporated underwriters must be eligible for certification by the commissioner. In order to be eligible for certification, an association must satisfy the requirements of subparagraph (A) of this paragraph and comply with the following requirements:
(I) The association shall satisfy its minimum capital and surplus requirements through the capital and surplus equivalents, taking into account liabilities, of the association and its members, which shall include a joint central fund that may be applied to any unsatisfied obligation of the association or any of its members, in an amount determined by the commissioner to provide adequate protection;
(II) The incorporated members of the association shall not be engaged in any business other than underwriting as a member of the association and shall be subject to the same level of regulation and solvency control by the association's domiciliary regulator as are the unincorporated members; and
(III) Within ninety (90) days after its financial statements are due to be filed with the association's domiciliary regulator, the association shall provide to the commissioner an annual certification by the association's domiciliary regulator of the solvency of each underwriter member or, if a certification is unavailable, financial statements, prepared by independent public accountants, of each underwriter member of the association.
(C) Prior to certification, the assuming insurer must be licensed and domiciled in a jurisdiction eligible to be considered for certification by the commissioner. The commissioner shall create and publish a list of qualified jurisdictions, under which an assuming insurer licensed and domiciled in such jurisdiction is eligible to be considered for certification by the commissioner as a certified reinsurer. The commissioner shall:
(I) In order to determine whether the domiciliary jurisdiction of a non United States assuming insurer is eligible to be recognized as a qualified jurisdiction, evaluate the appropriateness and effectiveness of the reinsurance supervisory system of the jurisdiction, both initially and on an ongoing basis, and consider the rights, benefits and the extent of reciprocal recognition afforded by the non United States jurisdiction to reinsurers licensed and domiciled in the United States. A qualified jurisdiction shall agree to share information and cooperate with the commissioner with respect to all certified reinsurers domiciled within that jurisdiction. A jurisdiction shall not be recognized as a qualified jurisdiction if the commissioner has determined that the jurisdiction does not adequately and promptly enforce final United States judgments and arbitration awards. Additional factors may be considered in the discretion of the commissioner;
(II) Consider the list of qualified jurisdictions published through the NAIC committee process in determining qualified jurisdictions. If the commissioner approves a jurisdiction as qualified that does not appear on the list of qualified jurisdictions, the commissioner shall provide thoroughly documented justification in accordance with criteria developed under rule and regulation developed by the commissioner;
(III) Recognize as qualified jurisdictions the United States jurisdictions that meet the requirement for accreditation under the NAIC financial standards and accreditation program;
(IV) If a certified reinsurer's domiciliary jurisdiction ceases to be a qualified jurisdiction, have the discretion to suspend the reinsurer's certification indefinitely, in lieu of revocation.
(D) Each certified reinsurer must receive a financial rating from the commissioner. The commissioner shall assign a rating to each certified reinsurer giving due consideration to the financial strength ratings that have been assigned by rating agencies deemed acceptable to the commissioner pursuant to regulation. The commissioner shall publish a list of all certified reinsurers and their ratings;
(E) A certified reinsurer shall secure obligations assumed from United States ceding insurers under this paragraph at a level consistent with its rating and as specified by rule and regulation promulgated by the commissioner. In fulfilling the requirements of this subparagraph:
(I) In order for a domestic ceding insurer to qualify for full financial statement credit for reinsurance ceded to a certified reinsurer, the certified reinsurer shall maintain security in a form acceptable to the commissioner and consistent with the provisions of W.S. 26-5-113, or in a multibeneficiary trust in accordance with paragraph (v) of this subsection and subsection (b) of this section, except as otherwise provided in this paragraph;
(II) If a certified reinsurer maintains a trust to fully secure its obligations subject to paragraph (v) of this subsection and subsection (b) of this section and chooses to secure its obligations incurred as a certified reinsurer in the form of a multibeneficiary trust, the certified reinsurer shall maintain separate trust accounts for its obligations incurred under reinsurance agreements issued or renewed as a certified reinsurer with reduced security as permitted by this paragraph or comparable laws of other United States jurisdictions and for its obligations subject to paragraph (v) of this subsection and subsection (b) of this section. It shall be a condition to the grant of certification under this paragraph that the certified reinsurer have bound itself, by the language of the trust and agreement with the commissioner with principal regulatory oversight of each trust account, to fund, upon termination of any trust account, out of the remaining surplus of the trust any deficiency of any other trust account;
(III) The minimum trusteed surplus requirements provided in paragraph (v) of this subsection are not applicable with respect to a multibeneficiary trust maintained by a certified reinsurer for the purpose of securing obligations incurred under this paragraph, except that any trust shall maintain a minimum trusteed surplus of ten million dollars ($10,000,000.00);
(IV) With respect to obligations incurred by a certified reinsurer under this paragraph, if the security is insufficient, the commissioner shall reduce the allowable credit by an amount proportionate to the deficiency and may impose further reductions in allowable credit upon finding there is a material risk the certified reinsurer's obligations will not be paid in full when due;
(V) For purposes of this paragraph, a certified reinsurer whose certification has been terminated for any reason shall be treated as a certified reinsurer required to secure one hundred percent (100%) of its obligations. If the commissioner continues to assign a higher rating as permitted by other provisions of this section, this requirement does not apply to a certified reinsurer in inactive status or to a reinsurer whose certification has been suspended. As used in this subdivision, "terminated" refers to revocation, suspension, voluntary surrender and inactive status.
(F) If an applicant for certification has been certified as a reinsurer in an NAIC accredited jurisdiction, the commissioner may defer to that jurisdiction's certification and may defer to the rating assigned by that jurisdiction, and the assuming insurer shall be considered to be a certified reinsurer in this state;
(G) A certified reinsurer that ceases to assume new business in this state may request to maintain its certification in inactive status in order to continue to qualify for a reduction in security for its in-force business. An inactive certified reinsurer shall continue to comply with all applicable requirements of this paragraph, and the commissioner shall assign a rating that takes into account the reasons why the reinsurer is not assuming new business, if relevant.
(vii) When the reinsurance is ceded to an assuming insurer in accordance with the following:
(A) The assuming insurer has its head office or is domiciled in a reciprocal jurisdiction, as applicable, and is licensed in a reciprocal jurisdiction;
(B) The assuming insurer has and maintains, on an ongoing basis, minimum capital and surplus, or its equivalent, calculated according to the methodology of its domiciliary jurisdiction in an amount specified in rules adopted by the commissioner. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it shall have and maintain, on an ongoing basis, minimum capital and surplus equivalents, which are net of liabilities, calculated according to the methodology applicable in its domiciliary jurisdiction and a central fund containing a balance in amounts specified in rules adopted by the commissioner;
(C) The assuming insurer has and maintains, on an ongoing basis, a minimum solvency or capital ratio, as applicable, as specified in rules adopted by the commissioner. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it shall have and maintain, on an ongoing basis, a minimum solvency or capital ratio in the reciprocal jurisdiction where the assuming insurer has its head office or is domiciled, as applicable, and is also licensed;
(D) The assuming insurer agrees and provides adequate assurance to the commissioner, in a form specified by rules adopted by the commissioner, that:
(I) The assuming insurer shall provide prompt written notice and explanation to the commissioner if it falls below the minimum requirements set forth in subparagraphs (B) or (C) of this paragraph, or if any regulatory action is taken against it for serious noncompliance with applicable law;
(II) The assuming insurer shall consent in writing to the jurisdiction of the courts of this state and to the appointment of the commissioner as agent for service of process. The commissioner may require that consent for service of process be provided to the commissioner and included in each reinsurance agreement. Nothing in this subdivision shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent such agreements are unenforceable under applicable insolvency or delinquency laws;
(III) The assuming insurer shall consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer or its legal successor, that have been declared enforceable in the jurisdiction where the judgment was obtained;
(IV) Each reinsurance agreement shall require the assuming insurer to provide security in an amount equal to one hundred percent (100%) of the assuming insurer's liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final judgment applicable to the reinsurance ceded pursuant to that agreement 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 resolution estate; and
(V) The assuming insurer shall confirm that it is not presently participating in any solvent scheme of arrangement which involves this state's ceding insurers. It shall also agree to notify the ceding insurer and the commissioner and to provide security in an amount equal to one hundred percent (100%) of the assuming insurer's liabilities to the ceding insurer should the assuming insurer enter into such a solvent scheme of arrangement. Such security shall be in a form consistent with the provisions of paragraph (vi) of this subsection, W.S. 26-5-113 and rules adopted by the commissioner.
(E) The assuming insurer or its legal successor shall provide, if requested by the commissioner, on behalf of itself and any legal predecessors, documentation to the commissioner as specified by rules adopted by the commissioner;
(F) The assuming insurer shall maintain a practice of prompt payment of claims under reinsurance agreements pursuant to criteria set forth in rules adopted by the commissioner;
(G) The assuming insurer's supervisory authority shall confirm to the commissioner on an annual basis, as of the preceding December 31 or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, that the assuming insurer complies with the requirements set forth in subparagraphs (B) and (C) of this paragraph;
(H) Nothing in this paragraph precludes an assuming insurer from providing the commissioner with information on a voluntary basis;
(J) The commissioner shall timely create and publish a list of reciprocal jurisdictions. The commissioner's list shall include any reciprocal jurisdiction as defined under subparagraphs (j)(ii)(A) and (B) of this section and the commissioner shall consider adding any other reciprocal jurisdiction included on the NAIC list of reciprocal jurisdictions published through the NAIC committee process. The commissioner may approve a jurisdiction as a reciprocal jurisdiction that does not appear on the NAIC list of reciprocal jurisdictions in accordance with criteria specified in rules adopted by the commissioner. The commissioner may remove a jurisdiction from the list of reciprocal jurisdictions upon a determination that the jurisdiction no longer meets the requirements of a reciprocal jurisdiction, in accordance with a process set forth in rules adopted by the commissioner, except that the commissioner shall not remove from the list a reciprocal jurisdiction as defined under subparagraph (j)(ii)(A) or (B) of this section. Upon removal of a reciprocal jurisdiction from this list, credit for reinsurance ceded to an assuming insurer which has its home office or is domiciled in that jurisdiction shall be allowed if otherwise allowed pursuant to this chapter;
(K) The commissioner shall timely create and publish a list of assuming insurers that have satisfied all conditions set forth in this paragraph and to which cessions shall be granted credit in accordance with this subsection. The commissioner may add an assuming insurer to the list if an NAIC accredited jurisdiction has added the assuming insurer to a list of such assuming insurers or if, upon initial eligibility, the assuming insurer submits the information to the commissioner as required under subparagraph (D) of this paragraph and complies with any additional requirements that the commissioner may impose by rule, except to the extent that they conflict with an applicable covered agreement;
(M) If the commissioner determines that an assuming insurer no longer meets one (1) or more of the requirements under this paragraph, the commissioner may revoke or suspend the eligibility of the assuming insurer for recognition under this paragraph in accordance with procedures set forth in rules adopted by the commissioner. While an assuming insurer's eligibility is suspended, no reinsurance agreement issued, amended or renewed after the effective date of the suspension qualifies for credit except to the extent that the assuming insurer's obligations under the contract are secured in accordance with W.S. 26-5-113. If an assuming insurer's eligibility is revoked, no credit for reinsurance may be granted after the effective date of the revocation with respect to any reinsurance agreements entered into by the assuming insurer, including reinsurance agreements entered into prior to 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 commissioner and consistent with the provisions of W.S. 26-5-113;
(N) 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 insurer post security for all outstanding ceded liabilities;
(O) Nothing in this paragraph shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in that reinsurance agreement, except as expressly prohibited by this chapter or other applicable law or rule;
(P) Credit may be taken under this paragraph only for reinsurance agreements entered into, amended, or renewed on or after July 1, 2021 and only with respect to losses incurred and reserves reported on or after the later of the date on which the assuming insurer has met all eligibility requirements of this paragraph and the effective date of the new reinsurance agreement, amendment or renewal. This subparagraph does not alter or impair a ceding insurer's right to take credit for reinsurance, to the extent that credit is not available under this paragraph, as long as the reinsurance qualifies for credit under any other applicable provision of this chapter;
(Q) Nothing in this paragraph shall authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement except as permitted by the terms of the agreement;
(R) Nothing in this paragraph shall limit, or in any way alter, the capacity of parties to any reinsurance agreement to renegotiate the agreement.
(b) A trust under paragraph (a)(v) of this section shall be established in a form approved by the commissioner. The trust instrument shall provide that contested claims shall be valid and enforceable upon the final order of any court of competent jurisdiction in the United States. The trust shall vest legal title to its assets in the trustees of the trust for its United States policyholders and ceding insurers, their assigns and successors in interest. The trust and the assuming insurer shall be subject to examination as determined by the commissioner. The trust described herein shall remain in effect for as long as the assuming insurer shall have outstanding obligations due under the reinsurance agreements subject to the trust. No later than February 28 of each year the trustees of the trust shall report to the commissioner in writing setting forth the balance of 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 shall not expire prior to the next following December 31.
(c) If the assuming insurer is not licensed, certified or accredited to transact insurance or reinsurance in this state, the credit permitted by paragraphs (a)(iii) and (v) of this section shall not be allowed unless the assuming insurer agrees in the reinsurance agreements:
(i) That in the event of the failure of the assuming insurer to perform its obligations under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding insurer, shall submit to the jurisdiction of any court of competent jurisdiction in any state of the United States, shall comply with all requirements necessary to give the court jurisdiction, and shall abide by the final decision of the court or of any appellate court in the event of an appeal; and
(ii) To designate the commissioner as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the ceding insurer.
(d) Subsection (c) of this section shall not supersede the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if such an obligation is created in the agreement.
(e) If an accredited or certified reinsurer ceases to meet the requirements for accreditation or certification, the commissioner may suspend or revoke the reinsurer's accreditation or certification in accordance with the following:
(i) The commissioner shall give the reinsurer notice and opportunity for hearing. The suspension or revocation shall not take effect until after the commissioner's order on hearing, unless:
(A) The reinsurer waives its right to a hearing;
(B) The commissioner's order is based on regulatory action by the reinsurer's domiciliary jurisdiction or the voluntary surrender or termination of the reinsurer's eligibility to transact insurance or reinsurance business in its domiciliary jurisdiction or in the primary certifying state of the reinsurer under subparagraph (a)(vi)(F) of this section; or
(C) The commissioner finds that an emergency requires immediate action and a court of competent jurisdiction has not stayed the commissioner's action.
(ii) While a reinsurer's accreditation or certification is suspended, no reinsurance contract issued or renewed after the effective date of the suspension qualifies for credit except to the extent that the reinsurer's obligations under the contract are secured in accordance with W.S. 26-5-113. If a reinsurer's accreditation or certification is revoked, no credit for reinsurance may be granted after the effective date of the revocation except to the extent that the reinsurer's obligations under the contract are secured in accordance with subparagraph (a)(vi)(E) of this section or W.S. 26-5-113.
(f) A ceding insurer shall take steps to manage its reinsurance recoverables proportionate to its own book of business. A domestic ceding insurer shall notify the commissioner within thirty (30) days after reinsurance recoverables from any single assuming insurer or group of affiliated assuming insurers exceeds fifty percent (50%) of the domestic ceding insurer's last reported surplus to policyholders, or after it is determined that reinsurance recoverables from any single assuming insurer or group of affiliated assuming insurers is likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer.
(g) A ceding insurer shall take steps to diversify its reinsurance program. A domestic ceding insurer shall notify the commissioner within thirty (30) days after ceding to any single assuming insurer or group of affiliated assuming insurers more than twenty percent (20%) of the ceding insurer's gross written premium in the prior calendar year, or after it has determined that the reinsurance ceded to any single assuming insurer or group of affiliated assuming insurers is likely to exceed this limit. The notification shall demonstrate the exposure is safely managed by the domestic ceding insurer.
(h) Credit for reinsurance ceded to a certified reinsurer is limited to reinsurance contracts entered or renewed on or after the effective date of the certification of the assuming insurer by the commissioner.
(j) As used in this section:
(i) "Covered agreement" means an agreement entered into pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, 31 U.S.C. §§ 313 and 314, that is currently in effect or in a period of provisional application and that addresses the elimination, under specified conditions, of collateral requirements as a condition for entering into any reinsurance agreement with a ceding insurer domiciled in this state or for allowing the ceding insurer to recognize credit for reinsurance;
(ii) "Reciprocal jurisdiction" means any of the following:
(A) A non-United States jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority, or, in the case of a covered agreement between the United States and the European Union, is a member state of the European Union;
(B) A United States jurisdiction that meets the requirements for accreditation under the NAIC financial standards and accreditation program;
(C) A qualified jurisdiction, as determined by the commissioner pursuant to subparagraph (a)(vi)(C) of this section, that is not otherwise described in subparagraphs (A) or (B) of this paragraph and that meets certain additional requirements, consistent with the terms and conditions of in-force covered agreements, as specified in rules adopted by the commissioner.