31A-37a-402 - Permitted reinsurance.
31A-37a-402. Permitted reinsurance.
(1) (a) A special purpose financial captive insurance company may reinsure only the risksof a ceding insurer, pursuant to a reinsurance contract.
(b) A special purpose financial captive insurance company may not issue a contract ofinsurance or a contract for assumption of risk or indemnification of loss other than a reinsurancecontract described in Subsection (1)(a).
(2) Unless otherwise approved in advance by the commissioner, a special purposefinancial captive insurance company may not assume or retain exposure to insurance orreinsurance losses for its own account that are not funded by:
(a) proceeds from a special purpose financial captive insurance company insurancesecuritization;
(b) a letter of credit;
(c) an asset described in Subsection 31A-37a-102(1)(c);
(d) a premium or another amount payable by the ceding insurer to the special purposefinancial captive insurance company pursuant to the reinsurance contract; or
(e) a return on investment of an item described in Subsections (2)(a) through (d).
(3) (a) A reinsurance contract shall contain a provision reasonably required or approvedby the commissioner.
(b) A requirement described in Subsection (3)(a) shall take into account the lawsapplicable to the ceding insurer regarding the ceding insurer taking credit for the reinsuranceprovided under the reinsurance contract.
(4) Subject to the prior approval of the commissioner, a special purpose financial captiveinsurance company may cede risks assumed through a reinsurance contract to one or morereinsurers through the purchase of reinsurance.
(5) (a) This Subsection (5) applies to a contract or commercial activity that:
(i) relates to or is incidental to a reinsurance contract; and
(ii) is necessary to fulfill the purposes of:
(A) a reinsurance contract;
(B) insurance securitization; and
(C) this chapter.
(b) A special purpose financial captive insurance company may engage in a contract orcommercial activity described in Subsection (5)(a) if the contract or commercial activity is:
(i) in the special purpose financial captive insurance company's plan of operation; or
(ii) approved in advance by the commissioner.
(c) A contract or commercial activity described in Subsection (5)(a) includes:
(i) entering into a reinsurance contract;
(ii) issuing a special purpose financial captive insurance company security;
(iii) complying with a term of a contract or security described in Subsection (5)(c)(i) or(ii);
(iv) entering into:
(A) a trust;
(B) a guaranteed investment contract;
(C) a swap;
(D) a derivative transaction;
(E) a tax transaction;
(F) an administration transaction;
(G) a reimbursement transaction; or
(H) a fiscal agent transaction;
(v) complying with a trust indenture, reinsurance, or retrocession; and
(vi) another agreement necessary or incidental to effect an insurance securitization incompliance with:
(A) the special purpose financial captive insurance company's plan of operation; and
(B) this chapter.
(6) Unless otherwise approved in advance by the commissioner, a reinsurance contractmay not contain a provision for payment by the special purpose financial captive insurancecompany in discharge of its obligations under the reinsurance contract to a person other than theceding insurer or any receiver of the ceding insurer.
(7) A special purpose financial captive insurance company shall notify the commissionerimmediately of an action by a ceding insurer or another person to foreclose on or otherwise takepossession of collateral provided by the special purpose financial captive insurance company tosecure an obligation of the special purpose financial captive insurance company.
Amended by Chapter 349, 2009 General Session