56-2-209 - Assuming insurers Determination of financial condition.
56-2-209. Assuming insurers Determination of financial condition.
(a) A reduction from liability for the reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of § 56-2-208 shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer, and the reduction shall be in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the ceding insurer, under a reinsurance contract with the assuming insurer as security for the payment of obligations under the contract, if the security is held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer, or, in the case of a trust, held in a qualified United States financial institution, as defined in subsection (d). This security may be in the form of:
(1) Cash;
(2) Securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners and qualifying as admitted assets;
(3) Clean, irrevocable, unconditional letters of credit, issued or confirmed by a qualified United States institution, as defined in subsection (c), no later than December 31 of the year for which filing is being made, and in the possession of the ceding company on or before the filing date of its annual statement; or
(4) Any other form of security acceptable to the commissioner.
(b) Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance, or confirmation, shall, notwithstanding the issuing or confirming institution's subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification or amendment, whichever first occurs.
(c) For purposes of subdivision (a)(3), a qualified United States financial institution means an institution that:
(1) Is organized or licensed, in the case of a United States office of a foreign banking organization, under the laws of the United States or any state in the United States;
(2) Is regulated, supervised and examined by United States federal or state authorities having regulatory authority over banks and trust companies; and
(3) Has been determined by either the commissioner, or the Securities Valuation Office of the National Association of Insurance Commissioners, to meet the standards of financial condition and standing considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the commissioner.
(d) For purposes of those provisions of this chapter specifying those institutions that are eligible to act as a fiduciary of a trust, qualified United States financial institution means an institution that:
(1) Is organized or licensed, in the case of a United States branch or agency office of a foreign banking organization, under the laws of the United States or any state and has been granted authority to operate with fiduciary powers; and
(2) Is regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies.
(e) The commissioner may adopt rules and regulations implementing this section and § 56-2-208. The rules and regulations shall be promulgated pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
(f) This section and § 56-2-208 apply to all cessions after July 1, 1993, under reinsurance agreements that have had an inception, anniversary, or renewal date not less than six (6) months after July 1, 1993.
[Acts 1947, ch. 154, § 3; C. Supp. 1950, § 6105.3 (Williams, § 6459.72); T.C.A. (orig. ed.), §§ 56-213, 56-227; Acts 1993, ch. 253, § 8.]