Missouri Revised Statutes













Chapter 375

Provisions Applicable to All Insurance Companies

←375.236

Section 375.246.1

375.251→

August 28, 2015

Reinsurance, when allowed as an asset or reduction from liability.

375.246. 1. Credit for reinsurance shall be allowed a domestic

ceding insurer as either an asset or a reduction from liability on account

of reinsurance ceded only when the reinsurer meets the requirements of

subdivisions (1) to (6) of this subsection. Credit shall be allowed

pursuant to subdivision (1), (2) or (3) of this subsection only as respects

cessions of those kinds or classes of business which the assuming insurer

is licensed or otherwise permitted to write or assume in its state of

domicile or, in the case of a United States branch of an alien assuming

insurer, in the state through which it is entered and licensed to transact

insurance or reinsurance. Credit shall be allowed pursuant to subdivision

(3), (4), or (5) of this subsection only if the applicable requirements of

subdivision (7) have been satisfied.



(1) Credit shall be allowed when the reinsurance is ceded to an

assuming insurer that is licensed to transact insurance in this state;



(2) Credit shall be allowed when the reinsurance is ceded to an

assuming insurer that is accredited by the director as a reinsurer in this

state. In order to be eligible for accreditation, a reinsurer shall:



(a) File with the director evidence of its submission to this state's

jurisdiction;



(b) Submit to the authority of the department of insurance, financial

institutions and professional registration to examine its books and

records;



(c) Be licensed to transact insurance or reinsurance in at least one

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 state;



(d) File annually with the director 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



(e) Demonstrate to the satisfaction of the director 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 such requirement as of the time of its

application if it maintains a surplus regarding policyholders in an amount

not less than twenty million dollars and its accreditation has not been

denied by the director within ninety days after submission of its

application;



(3) Credit shall be allowed when the reinsurance is ceded to an

assuming insurer that is domiciled in, or in the case of a United States

branch of an alien assuming insurer is entered through, a state that

employs standards regarding credit for reinsurance substantially similar to

those applicable under this statute 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; except that this paragraph 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 the department of insurance,

financial institutions and professional registration to examine its books

and records;



(4) (a) Credit shall be allowed when the reinsurance is ceded to an

assuming insurer that maintains a trust fund in a qualified United States

financial institution, as defined in subdivision (2) of subsection 3 of

this section, for the payment of the valid claims of its United States

ceding insurers, their assigns and successors in interest. To enable the

director to determine the sufficiency of the trust fund, the assuming

insurer shall report annually to the director information substantially the

same as that required to be reported on the National Association of

Insurance Commissioners' annual statement form by licensed insurers. The

assuming insurer shall submit to examination of its books and records by

the director.



(b) Credit for reinsurance shall not be granted pursuant to this

subdivision unless the form of the trust and any amendments to the trust

have been approved by:



a. The commissioner or director of the state agency regulating

insurance in the state where the trust is domiciled; or



b. The commissioner or director of another state who, pursuant to the

terms of the trust instrument, has accepted principal regulatory oversight

of the trust.



(c) The form of the trust and any trust amendments shall also be

filed with the commissioner or director in every state in which the ceding

insurer beneficiaries of the trust are domiciled. 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 its trustees for the

benefit of the assuming insurer's United States ceding insurers, their

assigns and successors in interest. The trust and the assuming insurer

shall be subject to examination as determined by the director.



(d) The trust shall remain in effect for as long as the assuming

insurer has outstanding obligations due under the reinsurance agreements

subject to the trust. No later than February twenty-eighth of each year

the trustees of the trust shall report to the director in writing 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 will not expire prior to the next

following December thirty-first.



(e) The following requirements apply to the following categories of

assuming insurers:



a. The trust fund for a single assuming insurer shall consist of

funds in trust in an amount not less than the assuming insurer's

liabilities attributable to reinsurance ceded by the United States ceding

insurers, and, in addition, the assuming insurer shall maintain a trusteed

surplus of not less than twenty million dollars, except as provided in

subparagraph b. of this paragraph;



b. At any time after the assuming insurer has permanently

discontinued underwriting new business secured by the trust for at least

three full years, the director with principal regulator oversight of the

trust may authorize a reduction in the required trusteed surplus, but only

after a finding based on an assessment of 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 shall not be

reduced to an amount less than thirty percent of the assuming insurer's

liabilities attributable to reinsurance ceded by United States ceding

insurers covered by the trust;



c. In the case of a group of incorporated and individual

unincorporated underwriters:



(i) For reinsurance ceded under reinsurance agreements with an

inception, amendment or renewal date on or after January 1, 1993, the trust

shall consist of a trusteed account in an amount not less than the

respective underwriter's several liabilities attributable to business ceded

by United States domiciled ceding insurers to any underwriter of the group;



(ii) For reinsurance ceded under reinsurance agreements with an

inception date on or before December 31, 1992, and not amended or renewed

after that date, notwithstanding the other provisions of this section, the

trust shall consist of a trustee account in an amount not less than the

respective underwriter's several insurance and reinsurance liabilities

attributable to business in the United States; and



(iii) In addition to these trusts, the group shall maintain in trust

a trusteed surplus of which one hundred million dollars shall be held

jointly for the benefit of the United States domiciled ceding insurers of

any member of the group for all years of account;



d. 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 regulation and solvency control by the group's

domiciliary regulator as are the unincorporated members;



e. Within ninety days after its financial statements are due to be

filed with the group's domiciliary regulator, the group shall provide to

the director an annual certification by the group'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 group;



(5) (a) Credit shall be allowed when the reinsurance is ceded to an

assuming insurer that has been certified by the director as a reinsurer in

this state and secures its obligations in accordance with the requirements

of this subdivision.



(b) In order to be eligible for certification, the assuming insurer

shall meet the following requirements:



a. The assuming insurer shall be domiciled and licensed to transact

insurance or reinsurance in a qualified jurisdiction, as determined by the

director under paragraph (d) of this subdivision;



b. The assuming insurer shall maintain minimum capital and surplus,

or its equivalent, in an amount to be determined by the director by rule;



c. The assuming insurer shall maintain financial strength ratings

from two or more rating agencies deemed acceptable by the director by rule;



d. The assuming insurer shall agree to submit to the jurisdiction of

this state, appoint the director as its agent for service of process in

this state, and agree to provide security for one hundred percent 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;



e. The assuming insurer shall agree to meet applicable information

filing requirements as determined by the director, both with respect to an

initial application for certification and on an ongoing basis; and



f. The assuming insurer shall satisfy any other requirements for

certification deemed relevant by the director.



(c) An association including incorporated and individual

unincorporated underwriters may be a certified reinsurer. To be eligible

for certification, in addition to satisfying requirements of paragraph (b)

of this subdivision:



a. The association shall satisfy its minimum capital and surplus

requirements through the capital and surplus equivalents (net of

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 director

to provide adequate protection;



b. 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



c. Within ninety days after its financial statements are due to be

filed with the association's domiciliary regulator, the association shall

provide to the director:



(i) An annual certification by the association's domiciliary

regulator of the solvency of each underwriter member; or



(ii) If a certification is unavailable, financial statements prepared

by independent public accountants of each underwriter member of the

association.



(d) a. The director 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

director as a certified reinsurer.



b. To determine whether the domiciliary jurisdiction of a non-United

States assuming insurer is eligible to be recognized as a qualified

jurisdiction, the director shall 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 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 director with respect to all certified reinsurers domiciled within that

jurisdiction. A jurisdiction shall not be recognized as a qualified

jurisdiction if the director has determined that the jurisdiction does not

adequately and promptly enforce final United States judgments and

arbitration awards. Additional factors may be considered at the discretion

of the director.



c. The director may consider a list of qualified jurisdictions

published by the National Association of Insurance Commissioners (NAIC) in

determining qualified jurisdictions for the purposes of this section. If

the director approves a jurisdiction as qualified that does not appear on

the list of qualified jurisdictions, the director shall provide thoroughly

documented justification in accordance with criteria to be developed by

rule.



d. United States jurisdictions that meet the requirement for

accreditation under the NAIC financial standards and accreditation program

shall be recognized as qualified jurisdictions.



e. If a certified reinsurer's domiciliary jurisdiction ceases to be a

qualified jurisdiction, the director has the discretion to suspend the

reinsurer's certification indefinitely, in lieu of revocation.



(e) The director 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 director by rule. The

director shall publish a list of all certified reinsurers and their

ratings.



(f) a. A certified reinsurer shall secure obligations assumed from

United States ceding insurers under this subdivision at a level consistent

with its rating, as specified in regulations promulgated by the director.



b. 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

director and consistent with the provisions of this section or in a

multibeneficiary trust in accordance with paragraph (e) of subdivision (4)

of this subsection, except as otherwise provided in this subdivision.



c. If a certified reinsurer maintains a trust to fully secure its

obligations under paragraph (d) of subdivision (4) of this subsection 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 subsection or comparable laws of other United States

jurisdictions and for its obligations subject to paragraph (e) of

subdivision (4) of this subsection. It shall be a condition to the grant

of certification under this section that the certified reinsurer shall have

bound itself, by the language of the trust and agreement with the director

with principal regulatory oversight of each such trust account, to fund,

upon termination of any such trust account, out of the remaining surplus of

such trust any deficiency of any other such trust account.



d. The minimum trusteed surplus requirements provided in paragraph

(e) of subdivision (4) 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

such trust shall maintain a minimum trusteed surplus of ten million

dollars.



e. With respect to obligations incurred by a certified reinsurer

under this paragraph, if the security is insufficient, the director shall

order the certified reinsurer to provide sufficient security for such

incurred obligations within thirty days. If a certified reinsurer does not

provide sufficient security for its obligations incurred under this

subsection within thirty days of being ordered to do so by the director,

the director has the discretion to allow credit in the amount of the

required security for one year. Following this one-year period, the

director shall impose reductions in allowable credit upon finding that

there is a material risk that the certified reinsurer's obligations will

not be paid in full when due.



f. (i) 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 of its

obligations.



(ii) As used in this subparagraph, the term "terminated" refers to

revocation, suspension, voluntary surrender, and inactive status.



(iii) If the director continues to assign a higher rating as

permitted by other provisions of this subdivision, this requirement does

not apply to a certified reinsurer in inactive status or to a reinsurer

whose certification has been suspended.



g. If an applicant for certification has been certified as a

reinsurer in an NAIC-accredited jurisdiction, the director has the

discretion to defer to that jurisdiction's certification and to the rating

assigned by that jurisdiction, and such assuming insurer shall be

considered to be a certified reinsurer in this state.



h. 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 subsection, and the director shall

assign a rating that takes into account, if relevant, the reasons why the

reinsurer is not assuming new business.



(6) Credit:



(a) Shall be allowed when the reinsurance is ceded to an assuming

insurer not meeting the requirements of subdivision (1), (2), (3), (4), or

(5) of this subsection, but only as to the insurance of risks located in a

jurisdiction of the United States where the reinsurance is required by

applicable law or regulation of that jurisdiction;



(b) May be allowed in the discretion of the director when the

reinsurance is ceded to an assuming insurer not meeting the requirements of

subdivision (1), (2), (3), (4), or (5) of this subsection, but only as to

the insurance of risks located in a foreign country where the reinsurance

is required by applicable law or regulation of that country;



(7) If the assuming insurer is not licensed, accredited, or certified

to transact insurance or reinsurance in this state, the credit permitted by

subdivisions (3) and (4) of this subsection shall not be allowed unless the

assuming insurer agrees in the reinsurance agreements:



(a) 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 the courts of this state, will comply with all requirements

necessary to give such courts jurisdiction, and will abide by the final

decisions of such courts or of any appellate courts in this state in the

event of an appeal; and



(b) To designate the director or a designated attorney 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. This paragraph is not intended to conflict with or override the

obligation of the parties to a reinsurance agreement to arbitrate their

disputes, if this obligation is created in the agreement and the

jurisdiction and situs of the arbitration is, with respect to any

receivership of the ceding company, any jurisdiction of the United States;



(8) If the assuming insurer does not meet the requirements of

subdivision (1), (2) or (3) of this subsection, the credit permitted by

subdivision (4) or (5) of this subsection shall not be allowed unless the

assuming insurer agrees in the trust agreements to the following

conditions:



(a) Notwithstanding any other provisions in the trust instrument, if

the trust fund is inadequate because it contains an amount less than the

amount required by paragraph (e) of subdivision (4) of this subsection, or

if the grantor of the trust has been declared insolvent or placed into

receivership, rehabilitation, liquidation or similar proceedings under the

laws of its state or country of domicile, the trustee shall comply with an

order of the commissioner or director with regulatory oversight over the

trust or with an order of a court of competent jurisdiction directing the

trustee to transfer to the commissioner or director with regulatory

oversight all of the assets of the trust fund;



(b) The assets shall be distributed by and claims shall be filed with

and valued by the commissioner or director with regulatory oversight in

accordance with the laws of the state in which the trust is domiciled that

are applicable to the liquidation of domestic insurance companies;



(c) If the commissioner or director with regulatory oversight

determines that the assets of the trust fund or any part thereof are not

necessary to satisfy the claims of the United States ceding insurers of the

grantor of the trust, the assets or part thereof shall be returned by the

commissioner or director with regulatory oversight to the trustee for

distribution in accordance with the trust agreement; and



(d) The grantor shall waive any right otherwise available to it under

United States law that is inconsistent with this subsection.



(9) (a) If an accredited or certified reinsurer ceases to meet the

requirements for accreditation or certification, the director may suspend

or revoke the reinsurer's accreditation or certification.



(b) The director shall give the reinsurer notice and opportunity for

a hearing. The suspension or revocation shall not take effect until after

the director's order on hearing, unless:



a. The reinsurer waives its right to hearing;



b. The director'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 subdivision (5)* of this

subsection; or



c. The director finds that an emergency requires immediate action,

and a court of competent jurisdiction has not stayed the commissioner's

action.



(c) 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 subdivision

(5) of this subsection or subsection 2 of this section. If a reinsurer's

accreditation or certification is revoked, no credit for reinsurance shall

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 subdivision (5) of this subsection or subsection 2 of this

section.



(10) (a) 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 director within thirty days after reinsurance

recoverables from any single assuming insurer or group of affiliated

assuming insurers exceeds fifty percent 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 such limit. The

notification shall demonstrate that the exposure is safely managed by the

domestic ceding insurer.



(b) A ceding insurer shall take steps to diversify its reinsurance

program. A domestic ceding insurer shall notify the director within thirty

days after ceding to any single assuming insurer or group of affiliated

assuming insurers more than twenty percent 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 such limit. The notification shall

demonstrate that the exposure is safely managed by the domestic ceding

insurer.



2. An asset or reduction from liability for the reinsurance ceded by

a domestic insurer to an assuming insurer not meeting the requirements of

subsection 1 of this section shall be allowed in an amount not exceeding

the liabilities carried by the ceding insurer. 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

thereunder, 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 subdivision (2) of subsection 3 of

this section. 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, including those deemed

exempt from filing as defined by the Purposes and Procedures Manual of the

Securities Valuation Office, and qualifying as admitted assets;



(3) (a) Clean, irrevocable, unconditional letters of credit issued

or confirmed by a qualified United States financial institution, as defined

in subdivision (1) of subsection 3 of this section, no later than December

thirty-first of the year for which filing is being made, and in the

possession of, or in trust for, the ceding insurer on or before the filing

date of its annual statement.



(b) Letters of credit meeting applicable standards of issuer

acceptability as of the dates of their issuance or confirmation,

notwithstanding the issuing or confirming institution's subsequent failure

to meet applicable standards of issuer acceptability, shall continue to be

acceptable as security until their expiration, extension, renewal,

modification or amendment, whichever first occurs;



(4) Any other form of security acceptable to the director.



3. (1) For purposes of subdivision (3) of subsection 2 of this

section, a "qualified United States financial institution" means an

institution that:



(a) Is organized or, in the case of a United States office of a

foreign banking organization, licensed under the laws of the United States

or any state thereof;



(b) Is regulated, supervised and examined by federal or state

authorities having regulatory authority over banks and trust companies; and



(c) Has been determined by either the director, or the securities

valuation office of the National Association of Insurance Commissioners, to

meet such standards of financial condition and standing as are considered

necessary and appropriate to regulate the quality of financial institutions

whose letters of credit will be acceptable to the director.



(2) A "qualified United States financial institution" means, for

purposes of those provisions of this law specifying those institutions that

are eligible to act as a fiduciary of a trust, an institution that:



(a) Is organized, or in the case of a United States branch or agency

office of a foreign banking organization, licensed under the laws of the

United States or any state thereof and has been granted authority to

operate with fiduciary powers; and



(b) Is regulated, supervised and examined by federal or state

authorities having regulatory authority over banks and trust companies.



4. The director may adopt rules and regulations implementing the

provisions of this section.



5. (1) The director shall disallow any credit as an asset or as a

deduction from liability for any reinsurance found by him to have been

arranged for the purpose principally of deception as to the ceding

company's financial condition as of the date of any financial statement of

the company. Without limiting the general purport of this provision,

reinsurance of any substantial part of the company's outstanding risks

contracted for in fact within four months prior to the date of any such

financial statement and cancelled in fact within four months after the date

of such statement, or reinsurance under which the assuming insurer bears no

substantial insurance risk or substantial risk of net loss to itself, shall

prima facie be deemed to have been arranged for the purpose principally of

deception within the intent of this provision.



(2) (a) The director shall also disallow as an asset or deduction

from liability to any ceding insurer any credit for reinsurance unless the

reinsurance is payable to the ceding company, and if it be insolvent to its

receiver, by the assuming insurer on the basis of the liability of the

ceding company under the contracts reinsured without diminution because of

the insolvency of the ceding company.



(b) Such payments shall be made directly to the ceding insurer or to

its domiciliary liquidator except:



a. Where the contract of insurance or reinsurance specifically

provides for payment to the named insured, assignee or named beneficiary of

the policy issued by the ceding insurer in the event of the insolvency of

the ceding insurer; or



b. Where the assuming insurer, with the consent of it and the direct

insured or insureds in an assumption reinsurance transaction subject to

sections 375.1280 to 375.1295, has assumed such policy obligations of the

ceding insurer as direct obligations of the assuming insurer to the payees

under such policies and in substitution for the obligations of the ceding

insurer to such payees.



(c) Notwithstanding paragraphs (a) and (b) of this subdivision, in

the event that a life and health insurance guaranty association has made

the election to succeed to the rights and obligations of the insolvent

insurer under the contract of reinsurance, then the reinsurer's liability

to pay covered reinsured claims shall continue under the contract of

reinsurance, subject to the payment to the reinsurer of the reinsurance

premiums for such coverage. Payment for such reinsured claims shall only

be made by the reinsurer pursuant to the direction of the guaranty

association or its designated successor. Any payment made at the direction

of the guaranty association or its designated successor by the reinsurer

will discharge the reinsurer of all further liability to any other party

for such claim payment.



(d) The reinsurance agreement may provide that the domiciliary

liquidator of an insolvent ceding insurer shall give written notice to the

assuming insurer of the pendency of a claim against such ceding insurer on

the contract reinsured within a reasonable time after such claim is filed

in the liquidation proceeding. During the pendency of such claim, any

assuming insurer may investigate such claim and interpose, at its own

expense, in the proceeding where such claim is to be adjudicated any

defenses which it deems available to the ceding insurer, or its liquidator.

Such expense may be filed as a claim against the insolvent ceding insurer

to the extent of a proportionate share of the benefit which may accrue to

the ceding insurer solely as a result of the defense undertaken by the

assuming insurer. Where two or more assuming insurers are involved in the

same claim and a majority in interest elect to interpose a defense to such

claim, the expense shall be apportioned in accordance with the terms of the

reinsurance agreement as though such expense had been incurred by the

ceding insurer.



6. To the extent that any reinsurer of an insurance company in

liquidation would have been required under any agreement pertaining to

reinsurance to post letters of credit or other security prior to an order

of liquidation to cover such reserves reflected upon the last financial

statement filed with a regulatory authority immediately prior to

receivership, such reinsurer shall be required to post letters of credit or

other security to cover reserves after a company has been placed in

liquidation or receivership. If a reinsurer shall fail to post letters of

credit or other security as required by a reinsurance agreement or the

provisions of this subsection, the director may consider disallowing as a

credit or asset, in whole or in part, any future reinsurance ceded to such

reinsurer by a ceding insurance company that is incorporated under the laws

of the state of Missouri.



7. The provisions of section 375.420 shall not apply to any action,

suit or proceeding by a ceding insurer against an assuming insurer arising

out of a contract of reinsurance effectuated in accordance with the laws of

Missouri.



8. Notwithstanding any other provision of this section, a domestic

insurer may take credit for reinsurance ceded either as an asset or a

reduction from liability only to the extent such credit is allowed by the

consistent application of either applicable statutory accounting principles

adopted by the NAIC or other accounting principles approved by the

director.



9. The director may suspend the accreditation, approval, or

certification under subsection 1 of this section of any reinsurer for

failure to comply with the applicable requirements of subsection 1 of this

section after providing the affected reinsurer with notice and opportunity

for hearing.



(L. 1967 p. 516, A.L. 1990 H.B. 1739, A.L. 1991 H.B. 385, et al., A.L.

1994 H.B. 1449 merged with S.B. 687, A.L. 2002 H.B. 1568, A.L.

2004 H.B. 1253 merged with S.B. 1235, A.L. 2013 H.B. 133)



Effective 1-01-14



*Words "subdivision (6)" appear in original rolls





2004

2002

0



2004



375.246. 1. Credit for reinsurance shall be allowed a domestic ceding

insurer as either an asset or a reduction from liability on account of

reinsurance ceded only when the reinsurer meets the requirements of

subdivisions (1) to (5) of this subsection. Credit shall be allowed pursuant

to subdivision (1), (2) or (3) of this subsection only as respects cessions of

those kinds or classes of business which the assuming insurer is licensed or

otherwise permitted to write or assume in its state of domicile or, in the

case of a United States branch of an alien assuming insurer, in the state

through which it is entered and licensed to transact insurance or reinsurance.

Credit shall be allowed pursuant to subdivision (3) or (4) of this subsection

only if the applicable requirements of subdivision (6) have been satisfied.



(1) Credit shall be allowed when the reinsurance is ceded to an assuming

insurer that is licensed to transact insurance in this state;



(2) Credit shall be allowed when the reinsurance is ceded to an assuming

insurer that is accredited as a reinsurer in this state. An accredited

reinsurer is one that:



(a) Files with the director evidence of its submission to this state's

jurisdiction;



(b) Submits to the authority of the department of insurance, financial

institutions and professional registration to examine its books and records;



(c) Is licensed to transact insurance or reinsurance in at least one

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 state;



(d) Files annually with the director 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



(e) Maintains a surplus as regards policyholders in an amount not less

than twenty million dollars and whose accreditation has not been denied by the

director within ninety days of its submission; or



(f) Maintains a surplus as regards policyholders in an amount less than

twenty million dollars and whose accreditation has been approved by the

director.





No credit shall be allowed a domestic ceding insurer if the assuming insurer's

accreditation has been revoked by the director after notice and hearing;



(3) Credit shall be allowed when the reinsurance is ceded to an assuming

insurer that is domiciled in, or in the case of a United States branch of an

alien assuming insurer is entered through, a state that employs standards

regarding credit for reinsurance substantially similar to those applicable

under this statute 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; except that this paragraph 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 the department of insurance, financial

institutions and professional registration to examine its books and records;



(4) (a) Credit shall be allowed when the reinsurance is ceded to an

assuming insurer that maintains a trust fund in a qualified United States

financial institution, as defined in subdivision (2) of subsection 3 of this

section, for the payment of the valid claims of its United States ceding

insurers, their assigns and successors in interest. To enable the director to

determine the sufficiency of the trust fund, the assuming insurer shall report

annually to the director information substantially the same as that required

to be reported on the National Association of Insurance Commissioners' annual

statement form by licensed insurers. The assuming insurer shall submit to

examination of its books and records by the director.



(b) Credit for reinsurance shall not be granted pursuant to this

subdivision unless the form of the trust and any amendments to the trust have

been approved by:



a. The commissioner or director of the state agency regulating insurance

in the state where the trust is domiciled; or



b. The commissioner or director of another state who, pursuant to the

terms of the trust instrument, has accepted principal regulatory oversight of

the trust.



(c) The form of the trust and any trust amendments shall also be filed

with the commissioner or director in every state in which the ceding insurer

beneficiaries of the trust are domiciled. 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 its trustees for the benefit of the assuming

insurer's United States ceding insurers, their assigns and successors in

interest. The trust and the assuming insurer shall be subject to examination

as determined by the director.



(d) The trust shall remain in effect for as long as the assuming insurer

has outstanding obligations due under the reinsurance agreements subject to

the trust. No later than February twenty-eighth of each year the trustees of

the trust shall report to the director in writing 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

will not expire prior to the next following December thirty-first.



(e) The following requirements apply to the following categories of

assuming insurers:



a. The trust fund for a single assuming insurer shall consist of funds

in trust in an amount not less than the assuming insurer's liabilities

attributable to reinsurance ceded by the United States ceding insurers, and,

in addition, the assuming insurer shall maintain a trusteed surplus of not

less than twenty million dollars;



b. In the case of a group of incorporated and individual unincorporated

underwriters:



(i) For reinsurance ceded under reinsurance agreements with an

inception, amendment or renewal date on or after August 1, 1995, the trust

shall consist of a trusteed account in an amount not less than the group's

several liabilities attributable to business ceded by United States domiciled

ceding insurers to any member of the group;



(ii) For reinsurance ceded under reinsurance agreements with an

inception date on or before July 31, 1995, and not amended or renewed after

that date, notwithstanding the other provisions of this section, the trust

shall consist of a trustee account in an amount not less than the group's

several insurance and reinsurance liabilities attributable to business in the

United States; and



(iii) In addition to these trusts, the group shall maintain in trust a

trusteed surplus of which one hundred million dollars shall be held jointly

for the benefit of the United States domiciled ceding insurers of any member

of the group for all years of account;



c. 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 regulation and solvency control by the group's

domiciliary regulator as are the unincorporated members;



d. Within ninety days after its financial statements are due to be filed

with the group's domiciliary regulator, the group shall provide to the

director an annual certification by the group'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 group;



(5) Credit:



(a) Shall be allowed when the reinsurance is ceded to an assuming

insurer not meeting the requirements of subdivision (1), (2), (3) or (4) of

this subsection, but only as to the insurance of risks located in a

jurisdiction of the United States where the reinsurance is required by

applicable law or regulation of that jurisdiction;



(b) May be allowed in the discretion of the director when the

reinsurance is ceded to an assuming insurer not meeting the requirements of

subdivision (1), (2), (3) or (4) of this subsection, but only as to the

insurance of risks located in a foreign country where the reinsurance is

required by applicable law or regulation of that country;



(6) If the assuming insurer is not licensed or accredited to transact

insurance or reinsurance in this state, the credit permitted by subdivisions

(3) and (4) of this subsection shall not be allowed unless the assuming

insurer agrees in the reinsurance agreements:



(a) 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 the courts of this state, will comply with all requirements necessary to

give such courts jurisdiction, and will abide by the final decisions of such

courts or of any appellate courts in this state in the event of an appeal; and



(b) To designate the director or a designated attorney 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 company. This

paragraph is not intended to conflict with or override the obligation of the

parties to a reinsurance agreement to arbitrate their disputes, if this

obligation is created in the agreement and the jurisdiction and situs of the

arbitration is, with respect to any receivership of the ceding company, any

jurisdiction of the United States;



(7) If the assuming insurer does not meet the requirements of

subdivision (1), (2) or (3) of this subsection, the credit permitted by

subdivision (4) of this subsection shall not be allowed unless the assuming

insurer agrees in the trust agreements to the following conditions:



(a) Notwithstanding any other provisions in the trust instrument, if the

trust fund is inadequate because it contains an amount less than the amount

required by paragraph (e) of subdivision (4) of this subsection, or if the

grantor of the trust has been declared insolvent or placed into receivership,

rehabilitation, liquidation or similar proceedings under the laws of its state

or country of domicile, the trustee shall comply with an order of the

commissioner or director with regulatory oversight over the trust or with an

order of a court of competent jurisdiction directing the trustee to transfer

to the commissioner or director with regulatory oversight all of the assets of

the trust fund;



(b) The assets shall be distributed by and claims shall be filed with

and valued by the commissioner or director with regulatory oversight in

accordance with the laws of the state in which the trust is domiciled that are

applicable to the liquidation of domestic insurance companies;



(c) If the commissioner or director with regulatory oversight determines

that the assets of the trust fund or any part thereof are not necessary to

satisfy the claims of the United States ceding insurers of the grantor of the

trust, the assets or part thereof shall be returned by the commissioner or

director with regulatory oversight to the trustee for distribution in

accordance with the trust agreement; and



(d) The grantor shall waive any right otherwise available to it under

United States law that is inconsistent with this subsection.



2. An asset or reduction from liability for the reinsurance ceded by a

domestic insurer to an assuming insurer not meeting the requirements of

subsection 1 of this section shall be allowed in an amount not exceeding the

liabilities carried by the ceding insurer. 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 thereunder, 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

subdivision (2) of subsection 3 of this section. 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) (a) Clean, irrevocable, unconditional letters of credit, as defined

in subdivision (1) of subsection 3 of this section, issued or confirmed by a

qualified United States financial institution no later than December

thirty-first of the year for which filing is being made, and in the possession

of, or in trust for, the ceding company on or before the filing date of its

annual statement.



(b) Letters of credit meeting applicable standards of issuer

acceptability as of the dates of their issuance or confirmation,

notwithstanding the issuing or confirming institution's subsequent failure to

meet applicable standards of issuer acceptability, shall continue to be

acceptable as security until their expiration, extension, renewal,

modification or amendment, whichever first occurs;



(4) Any other form of security acceptable to the director.



3. (1) For purposes of subdivision (3) of subsection 2 of this section,

a "qualified United States financial institution" means an institution that:



(a) Is organized or, in the case of a United States office of a foreign

banking organization, licensed under the laws of the United States or any

state thereof;



(b) Is regulated, supervised and examined by federal or state

authorities having regulatory authority over banks and trust companies; and



(c) Has been determined by either the director, or the securities

valuation office of the National Association of Insurance Commissioners, to

meet such standards of financial condition and standing as are considered

necessary and appropriate to regulate the quality of financial institutions

whose letters of credit will be acceptable to the director.



(2) A "qualified United States financial institution" means, for

purposes of those provisions of this law specifying those institutions that

are eligible to act as a fiduciary of a trust, an institution that:



(a) Is organized, or in the case of a United States branch or agency

office of a foreign banking organization, licensed under the laws of the

United States or any state thereof and has been granted authority to operate

with fiduciary powers; and



(b) Is regulated, supervised and examined by federal or state

authorities having regulatory authority over banks and trust companies.



4. The director may adopt rules and regulations implementing the

provisions of this section.



5. (1) The director shall disallow any credit as an asset or as a

deduction from liability for any reinsurance found by him to have been

arranged for the purpose principally of deception as to the ceding company's

financial condition as of the date of any financial statement of the company.

Without limiting the general purport of this provision, reinsurance of any

substantial part of the company's outstanding risks contracted for in fact

within four months prior to the date of any such financial statement and

cancelled in fact within four months after the date of such statement, or

reinsurance under which the assuming insurer bears no substantial insurance

risk or substantial risk of net loss to itself, shall prima facie be deemed to

have been arranged for the purpose principally of deception within the intent

of this provision.



(2) (a) The director shall also disallow as an asset or deduction from

liability to any ceding insurer any credit for reinsurance unless the

reinsurance is payable to the ceding company, and if it be insolvent to its

receiver, by the assuming insurer on the basis of the liability of the ceding

company under the contracts reinsured without diminution because of the

insolvency of the ceding company.



(b) Such payments shall be made directly to the ceding insurer or to its

domiciliary liquidator except:



a. Where the contract of insurance or reinsurance specifically provides

for payment to the named insured, assignee or named beneficiary of the policy

issued by the ceding insurer in the event of the insolvency of the ceding

insurer; or



b. Where the assuming insurer, with the consent of it and the direct

insured or insureds in an assumption reinsurance transaction subject to

sections 375.1280 to 375.1295, has assumed such policy obligations of the

ceding insurer as direct obligations of the assuming insurer to the payees

under such policies and in substitution for the obligations of the ceding

insurer to such payees.



(c) Notwithstanding paragraphs (a) and (b) of this subdivision, in the

event that a life and health insurance guaranty association has made the

election to succeed to the rights and obligations of the insolvent insurer

under the contract of reinsurance, then the reinsurer's liability to pay

covered reinsured claims shall continue under the contract of reinsurance,

subject to the payment to the reinsurer of the reinsurance premiums for such

coverage. Payment for such reinsured claims shall only be made by the

reinsurer pursuant to the direction of the guaranty association or its

designated successor. Any payment made at the direction of the guaranty

association or its designated successor by the reinsurer will discharge the

reinsurer of all further liability to any other party for such claim payment.







(d) The reinsurance agreement may provide that the domiciliary

liquidator of an insolvent ceding insurer shall give written notice to the

assuming insurer of the pendency of a claim against such ceding insurer on the

contract reinsured within a reasonable time after such claim is filed in the

liquidation proceeding. During the pendency of such claim, any assuming

insurer may investigate such claim and interpose, at its own expense, in the

proceeding where such claim is to be adjudicated any defenses which it deems

available to the ceding insurer, or its liquidator. Such expense may be filed

as a claim against the insolvent ceding insurer to the extent of a

proportionate share of the benefit which may accrue to the ceding insurer

solely as a result of the defense undertaken by the assuming insurer. Where

two or more assuming insurers are involved in the same claim and a majority in

interest elect to interpose a defense to such claim, the expense shall be

apportioned in accordance with the terms of the reinsurance agreement as

though such expense had been incurred by the ceding insurer.







6. To the extent that any reinsurer of an insurance company in

liquidation would have been required under any agreement pertaining to

reinsurance to post letters of credit or other security prior to an order of

liquidation to cover such reserves reflected upon the last financial statement

filed with a regulatory authority immediately prior to receivership, such

reinsurer shall be required to post letters of credit or other security to

cover reserves after a company has been placed in liquidation or receivership.

If a reinsurer shall fail to post letters of credit or other security as

required by a reinsurance agreement or the provisions of this subsection, the

director may consider disallowing as a credit or asset, in whole or in part,

any future reinsurance ceded to such reinsurer by a ceding insurance company

that is incorporated under the laws of the state of Missouri.



7. The provisions of section 375.420 shall not apply to any action, suit

or proceeding by a ceding insurer against an assuming insurer arising out of a

contract of reinsurance effectuated in accordance with the laws of Missouri.







8. The provisions of this section shall become effective on January 1,

2003, and shall be applicable to the financial statements of a reinsurer as of

December 31, 2002.



2002



375.246. 1. Credit for reinsurance shall be allowed a domestic

ceding insurer as either an asset or a reduction from liability on account

of reinsurance ceded only when the reinsurer meets the requirements of

subdivisions (1) to (5) of this subsection. Credit shall be allowed

pursuant to subdivision (1), (2) or (3) of this subsection only as respects

cessions of those kinds or classes of business which the assuming insurer

is licensed or otherwise permitted to write or assume in its state of

domicile or, in the case of a United States branch of an alien assuming

insurer, in the state through which it is entered and licensed to transact

insurance or reinsurance. Credit shall be allowed pursuant to subdivision

(3) or (4) of this subsection only if the applicable requirements of

subdivision (6) have been satisfied.



(1) Credit shall be allowed when the reinsurance is ceded to an

assuming insurer that is licensed to transact insurance in this state;



(2) Credit shall be allowed when the reinsurance is ceded to an

assuming insurer that is accredited as a reinsurer in this state. An

accredited reinsurer is one that:



(a) Files with the director evidence of its submission to this

state's jurisdiction;



(b) Submits to the authority of the department of insurance to

examine its books and records;



(c) Is licensed to transact insurance or reinsurance in at least one

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 state;



(d) Files annually with the director 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



(e) Maintains a surplus as regards policyholders in an amount not

less than twenty million dollars and whose accreditation has not been

denied by the director within ninety days of its submission; or



(f) Maintains a surplus as regards policyholders in an amount less

than twenty million dollars and whose accreditation has been approved by

the director.





No credit shall be allowed a domestic ceding insurer if the assuming

insurer's accreditation has been revoked by the director after notice and

hearing;



(3) Credit shall be allowed when the reinsurance is ceded to an

assuming insurer that is domiciled in, or in the case of a United States

branch of an alien assuming insurer is entered through, a state that

employs standards regarding credit for reinsurance substantially similar to

those applicable under this statute 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; except that this paragraph 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 the department of insurance to

examine its books and records;



(4) (a) Credit shall be allowed when the reinsurance is ceded to an

assuming insurer that maintains a trust fund in a qualified United States

financial institution, as defined in subdivision (2) of subsection 3 of

this section, for the payment of the valid claims of its United States

ceding insurers, their assigns and successors in interest. To enable the

director to determine the sufficiency of the trust fund, the assuming

insurer shall report annually to the director information substantially the

same as that required to be reported on the National Association of

Insurance Commissioners' annual statement form by licensed insurers. The

assuming insurer shall submit to examination of its books and records by

the director.



(b) Credit for reinsurance shall not be granted pursuant to this

subdivision unless the form of the trust and any amendments to the trust

have been approved by:



a. The commissioner or director of the state agency regulating

insurance in the state where the trust is domiciled; or



b. The commissioner or director of another state who, pursuant to the

terms of the trust instrument, has accepted principal regulatory oversight

of the trust.



(c) The form of the trust and any trust amendments shall also be

filed with the commissioner or director in every state in which the ceding

insurer beneficiaries of the trust are domiciled. 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 its trustees for the

benefit of the assuming insurer's United States ceding insurers, their

assigns and successors in interest. The trust and the assuming insurer

shall be subject to examination as determined by the director.



(d) The trust shall remain in effect for as long as the assuming

insurer has outstanding obligations due under the reinsurance agreements

subject to the trust. No later than February twenty-eighth of each year

the trustees of the trust shall report to the director in writing 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 will not expire prior to the next

following December thirty-first.



(e) The following requirements apply to the following categories of

assuming insurers:



a. The trust fund for a single assuming insurer shall consist of

funds in trust in an amount not less than the assuming insurer's

liabilities attributable to reinsurance ceded by the United States ceding

insurers, and, in addition, the assuming insurer shall maintain a trusteed

surplus of not less than twenty million dollars;



b. In the case of a group of incorporated and individual

unincorporated underwriters:



(i) For reinsurance ceded under reinsurance agreements with an

inception, amendment or renewal date on or after August 1, 1995, the trust

shall consist of a trusteed account in an amount not less than the group's

several liabilities attributable to business ceded by United States

domiciled ceding insurers to any member of the group;



(ii) For reinsurance ceded under reinsurance agreements with an

inception date on or before July 31, 1995, and not amended or renewed after

that date, notwithstanding the other provisions of this section, the trust

shall consist of a trustee account in an amount not less than the group's

several insurance and reinsurance liabilities attributable to business in

the United States; and



(iii) In addition to these trusts, the group shall maintain in trust

a trusteed surplus of which one hundred million dollars shall be held

jointly for the benefit of the United States domiciled ceding insurers of

any member of the group for all years of account;



c. 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 regulation and solvency control by the group's

domiciliary regulator as are the unincorporated members;



d. Within ninety days after its financial statements are due to be

filed with the group's domiciliary regulator, the group shall provide to

the director an annual certification by the group'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 group;



(5) Credit:



(a) Shall be allowed when the reinsurance is ceded to an assuming

insurer not meeting the requirements of subdivision (1), (2), (3) or (4) of

this subsection, but only as to the insurance of risks located in a

jurisdiction of the United States where the reinsurance is required by

applicable law or regulation of that jurisdiction;



(b) May be allowed in the discretion of the director when the

reinsurance is ceded to an assuming insurer not meeting the requirements of

subdivision (1), (2), (3) or (4) of this subsection, but only as to the

insurance of risks located in a foreign country where the reinsurance is

required by applicable law or regulation of that country;



(6) If the assuming insurer is not licensed or accredited to transact

insurance or reinsurance in this state, the credit permitted by

subdivisions (3) and (4) of this subsection shall not be allowed unless the

assuming insurer agrees in the reinsurance agreements:



(a) 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 the courts of this state, will comply with all requirements

necessary to give such courts jurisdiction, and will abide by the final

decisions of such courts or of any appellate courts in this state in the

event of an appeal; and



(b) To designate the director or a designated attorney 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

company. This paragraph is not intended to conflict with or override the

obligation of the parties to a reinsurance agreement to arbitrate their

disputes, if this obligation is created in the agreement and the

jurisdiction and situs of the arbitration is, with respect to any

receivership of the ceding company, any jurisdiction of the United States;



(7) If the assuming insurer does not meet the requirements of

subdivision (1), (2) or (3) of this subsection, the credit permitted by

subdivision (4) of this subsection shall not be allowed unless the assuming

insurer agrees in the trust agreements to the following conditions:



(a) Notwithstanding any other provisions in the trust instrument, if

the trust fund is inadequate because it contains an amount less than the

amount required by paragraph (e) of subdivision (4) of this subsection, or

if the grantor of the trust has been declared insolvent or placed into

receivership, rehabilitation, liquidation or similar proceedings under the

laws of its state or country of domicile, the trustee shall comply with an

order of the commissioner or director with regulatory oversight over the

trust or with an order of a court of competent jurisdiction directing the

trustee to transfer to the commissioner or director with regulatory

oversight all of the assets of the trust fund;



(b) The assets shall be distributed by and claims shall be filed with

and valued by the commissioner or director with regulatory oversight in

accordance with the laws of the state in which the trust is domiciled that

are applicable to the liquidation of domestic insurance companies;



(c) If the commissioner or director with regulatory oversight

determines that the assets of the trust fund or any part thereof are not

necessary to satisfy the claims of the United States ceding insurers of the

grantor of the trust, the assets or part thereof shall be returned by the

commissioner or director with regulatory oversight to the trustee for

distribution in accordance with the trust agreement; and



(d) The grantor shall waive any right otherwise available to it under

United States law that is inconsistent with this subsection.



2. An asset or reduction from liability for the reinsurance ceded by

a domestic insurer to an assuming insurer not meeting the requirements of

subsection 1 of this section shall be allowed in an amount not exceeding

the liabilities carried by the ceding insurer. 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

thereunder, 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 subdivision (2) of subsection 3 of

this section. 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) (a) Clean, irrevocable, unconditional letters of credit, as

defined in subdivision (1) of subsection 3 of this section, issued or

confirmed by a qualified United States financial institution no later than

December thirty-first of the year for which filing is being made, and in

the possession of, or in trust for, the ceding company on or before the

filing date of its annual statement.



(b) Letters of credit meeting applicable standards of issuer

acceptability as of the dates of their issuance or confirmation,

notwithstanding the issuing or confirming institution's subsequent failure

to meet applicable standards of issuer acceptability, shall continue to be

acceptable as security until their expiration, extension, renewal,

modification or amendment, whichever first occurs;



(4) Any other form of security acceptable to the director.



3. (1) For purposes of subdivision (3) of subsection 2 of this

section, a "qualified United States financial institution" means an

institution that:



(a) Is organized or, in the case of a United States office of a

foreign banking organization, licensed under the laws of the United States

or any state thereof;



(b) Is regulated, supervised and examined by federal or state

authorities having regulatory authority over banks and trust companies; and



(c) Has been determined by either the director, or the securities

valuation office of the National Association of Insurance Commissioners, to

meet such standards of financial condition and standing as are considered

necessary and appropriate to regulate the quality of financial institutions

whose letters of credit will be acceptable to the director.



(2) A "qualified United States financial institution" means, for

purposes of those provisions of this law specifying those institutions that

are eligible to act as a fiduciary of a trust, an institution that:



(a) Is organized, or in the case of a United States branch or agency

office of a foreign banking organization, licensed under the laws of the

United States or any state thereof and has been granted authority to

operate with fiduciary powers; and



(b) Is regulated, supervised and examined by federal or state

authorities having regulatory authority over banks and trust companies.



4. The director may adopt rules and regulations implementing the

provisions of this section.



5. (1) The director shall disallow any credit as an asset or as a

deduction from liability for any reinsurance found by him to have been

arranged for the purpose principally of deception as to the ceding

company's financial condition as of the date of any financial statement of

the company. Without limiting the general purport of this provision,

reinsurance of any substantial part of the company's outstanding risks

contracted for in fact within four months prior to the date of any such

financial statement and canceled in fact within four months after the date

of such statement, or reinsurance under which the assuming insurer bears no

substantial insurance risk or substantial risk of net loss to itself, shall

prima facie be deemed to have been arranged for the purpose principally of

deception within the intent of this provision.



(2) (a) The director shall also disallow as an asset or deduction

from liability to any ceding insurer any credit for reinsurance unless the

reinsurance is payable to the ceding company, and if it be impaired or

insolvent to its receiver, by the assuming insurer on the basis of the

liability of the ceding company under the contracts reinsured without

diminution because of the insolvency of the ceding company.



(b) Such payments shall be made directly to the ceding insurer or to

its domiciliary liquidator except:



a. Where the contract of insurance or reinsurance specifically

provides for payment to the named insured, assignee or named beneficiary of

the policy issued by the ceding insurer in the event of the insolvency of

the ceding insurer; or



b. Where the assuming insurer, with the consent of it and the direct

insured or insureds in an assumption reinsurance transaction subject to

sections 375.1280 to 375.1295, has assumed such policy obligations of the

ceding insurer as direct obligations of the assuming insurer to the payees

under such policies and in substitution for the obligations of the ceding

insurer to such payees.



(c) Notwithstanding paragraphs (a) and (b) of this subdivision, in

the event that a life and health insurance guaranty association has made

the election to succeed to the rights and obligations of the insolvent

insurer under the contract of reinsurance, then the reinsurer's liability

to pay covered reinsured claims shall continue under the contract of

reinsurance, subject to the payment to the reinsurer of the reinsurance

premiums for such coverage. Payment for such reinsured claims shall only

be made by the reinsurer pursuant to the direction of the guaranty

association or its designated successor. Any payment made at the direction

of the guaranty association or its designated successor by the reinsurer

will discharge the reinsurer of all further liability to any other party

for such claim payment.



(d) The reinsurance agreement may provide that the domiciliary

liquidator of an insolvent ceding insurer shall give written notice to the

assuming insurer of the pendency of a claim against such ceding insurer on

the contract reinsured within a reasonable time after such claim is filed

in the liquidation proceeding. During the pendency of such claim, any

assuming insurer may investigate such claim and interpose, at its own

expense, in the proceeding where such claim is to be adjudicated any

defenses which it deems available to the ceding insurer, or its liquidator.

Such expense may be filed as a claim against the insolvent ceding insurer

to the extent of a proportionate share of the benefit which may accrue to

the ceding insurer solely as a result of the defense undertaken by the

assuming insurer. Where two or more assuming insurers are involved in the

same claim and a majority in interest elect to interpose a defense to such

claim, the expense shall be apportioned in accordance with the terms of the

reinsurance agreement as though such expense had been incurred by the

ceding insurer.



6. To the extent that any reinsurer of an insurance company in

liquidation would have been required under any agreement pertaining to

reinsurance to post letters of credit or other security prior to an order

of liquidation to cover such reserves reflected upon the last financial

statement filed with a regulatory authority immediately prior to

receivership, such reinsurer shall be required to post letters of credit or

other security to cover reserves after a company has been placed in

liquidation or receivership. If a reinsurer shall fail to post letters of

credit or other security as required by a reinsurance agreement or the

provisions of this subsection, the director may consider disallowing as a

credit or asset, in whole or in part, any future reinsurance ceded to such

reinsurer by a ceding insurance company that is incorporated under the laws

of the state of Missouri.



7. The provisions of section 375.420 shall not apply to any action,

suit or proceeding by a ceding insurer against an assuming insurer arising

out of a contract of reinsurance effectuated in accordance with the laws of

Missouri.



8. The provisions of this section shall become effective on January

1, 2003, and shall be applicable to the financial statements of a reinsurer

as of December 31, 2002.



0



375.246. 1. 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 when the reinsurer

meets the requirements of subdivisions (1) to (4) of this

subsection. If meeting the requirements of subdivision (3) or

(4) of this subsection, the requirements of subdivision (5) must

also be met.



(1) Credit shall be allowed when the reinsurance is ceded

to an assuming insurer which is licensed to transact insurance in

this state;



(2) Credit shall be allowed when the reinsurance is ceded

to an assuming insurer which is accredited as a reinsurer in this

state. An accredited reinsurer is one which:



(a) Files with the director evidence of its submission to

this state's jurisdiction;



(b) Submits to the authority of the department of insurance

to examine its books and records;



(c) Is licensed to transact insurance or reinsurance in at

least one 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 state;



(d) Files annually with the director 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



(e) Either:



a. Maintains a surplus as regards policyholders in an

amount which is not less than twenty million dollars and whose

accreditation has not been denied by the director within ninety

days of its submission; or



b. Maintains a surplus as regards policyholders in an

amount less than twenty million dollars and whose accreditation

has been approved by the director;



c. The requirements in subparagraphs a and b of this

paragraph do not apply to reinsurance ceded and assumed pursuant

to pooling arrangements among insurers in the same holding

company system;





No credit shall be allowed a domestic ceding insurer if the

assuming insurer's accreditation has been revoked by the director

after notice and hearing.



(3) Credit shall be allowed when 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, a state which employs standards regarding

credit for reinsurance substantially similar to those applicable

under this statute 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; and



(b) Submits to the authority of the department of insurance

to examine its books and records;



(4) (a) Credit shall be allowed when the reinsurance is

ceded to an assuming insurer which maintains a trust fund in a

qualified United States financial institution, as defined in

subdivision (2) of subsection 3 of this section, 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 director information

substantially the same as that required to be reported on the

National Association of Insurance Commissioners' annual statement

form by licensed insurers to enable the director to determine the

sufficiency of the trust fund. In the case of 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. In the case of 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, the group shall maintain a

trusteed surplus of which one hundred million dollars shall be

held jointly for the benefit of United States ceding insurers or

any member of the group. 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. The group shall

make available to the director an annual certification of the

solvency of each underwriter by the group's domiciliary regulator

and its independent public accountants;



(b) In the case of a group of incorporated insurers under

common administration which complies with the filing requirements

contained in the previous paragraph, and which is under the

supervision of the Department of Trade and Industry of the United

Kingdom and submits to the authority of the department of

insurance to examine its books and records and bears the expense

of such examination, and which has aggregate policyholders'

surplus of ten billion dollars; the trust shall be in an amount

equal to the group's several liabilities attributable to United

States business ceded by United States ceding insurers to any

member of the group pursuant to reinsurance contracts issued in

the name of such group; plus the group shall maintain a joint

trusteed surplus of which one hundred million dollars shall be

held jointly for the benefit of United States ceding insurers or

any member of the group as additional security for any such

liabilities, and each member of the group shall make available to

the director an annual certification of the member's solvency by

the member's domiciliary regulator and its independent public

accountant;



(c) Such trust shall be established in a form approved by

the director of insurance. 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 director. The trust described herein must

remain in effect for as long as the assuming insurer shall have

outstanding obligations due under the reinsurance agreements

subject to the trust;



(d) No later than February twenty-eighth of each year the

trustees of the trust shall report to the director 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

thirty-first;



(5) If the assuming insurer is not licensed or accredited

to transact insurance or reinsurance in this state, the credit

permitted by subdivisions (3) and (4) of this subsection shall

not be allowed unless the assuming insurer agrees in the

reinsurance agreements:



(a) 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 the courts

of this state, will comply with all requirements necessary to

give such courts jurisdiction, and will abide by the final

decisions of such courts or of any appellate courts in this state

in the event of an appeal; and



(b) To designate the director or a designated attorney 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 company. This provision is not intended to

conflict with or override the obligation of the parties to a

reinsurance agreement to arbitrate their disputes, if such an

obligation is created in the agreement and the jurisdiction and

situs of the arbitration is the state of Missouri.



2. A reduction from liability for the reinsurance ceded by

a domestic insurer to an assuming insurer not meeting the

requirements of subsection 1 of this section shall be allowed in

an amount not exceeding the liabilities carried by the ceding

insurer and such 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

such assuming insurer as security for the payment of obligations

thereunder, if such 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 subdivision

(2) of subsection 3 of this section. 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, as

defined in subdivision (1) of subsection 3 of this section,

issued or confirmed by a qualified United States institution no

later than December thirty-first with respect to 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.

Letters of credit meeting applicable standards of issuer

acceptability as of the dates of their issuance or confirmation,

notwithstanding the issuing or confirming institution's

subsequent failure to meet applicable standards of issuer

acceptability, shall continue to be acceptable as security until

their expiration, extension, renewal, modification or amendment,

whichever first occurs;



(4) Any other form of security acceptable to the director

and approved by the attorney general.



3. (1) For purposes of subdivision (3) of subsection 2 of

this section, a "qualified United States financial institution"

means an institution that:



(a) Is organized or in the case of a United States office

of a foreign banking organization, licensed under the laws of the

United States or any state thereof;



(b) Is regulated, supervised and examined by federal or

state authorities having regulatory authority over banks and

trust companies; and



(c) Has been determined by either the director, or the

securities valuation office of the National Association of

Insurance Commissioners, to meet such standards of financial

condition and standing as are considered necessary and

appropriate to regulate the quality of financial institutions

whose letters of credit will be acceptable to the director.



(2) A "qualified United States financial institution"

means, for purposes of those provisions of this law specifying

those institutions that are eligible to act as a fiduciary of a

trust, an institution that:



(a) Is organized, or in the case of a United States branch

or agency office of a foreign banking organization, licensed

under the laws of the United States or any state thereof and has

been granted authority to operate with fiduciary powers; and



(b) Is regulated, supervised and examined by federal or

state authorities having regulatory authority over banks and

trust companies.



4. The director may adopt rules and regulations

implementing the provisions of this section.



5. The director shall disallow any credit as an asset or as

a deduction from liability for any reinsurance found by him to

have been arranged for the purpose principally of deception as to

the ceding company's financial condition as of the date of any

financial statement of the company. Without limiting the general

purport of this provision, reinsurance of any substantial part of

the company's outstanding risks contracted for in fact within

four months prior to the date of any such financial statement and

canceled in fact within four months after the date of such

statement, or reinsurance under which the assuming insurer bears

no substantial insurance risk or substantial risk of net loss to

itself, shall prima facie be deemed to have been arranged for the

purpose principally of deception within the intent of this

provision. The director shall also disallow any credit for

reinsurance unless the reinsurance is payable to the ceding

company, and if it be impaired or insolvent to its rehabilitator

or receiver, by the assuming insurer on the basis of the

liability of the ceding company under the contracts reinsured

without diminution because of the insolvency of the ceding

company.



6. After an insurer has been declared insolvent the

liquidator or receiver of such insurer shall file with the

director a statement which shall reflect the claims reserves

(including incurred but not reported losses) and unearned premium

reserves which have been established by the liquidator or

receiver and which shall also set forth the amounts of such

reserves that are allocable to particular reinsurers of the

insolvent company. Each such statement shall be filed by each

liquidator or receiver not less frequently than annually and

shall be considered for all intents and purposes as the annual

statement which was required to be filed by the insurer with the

director prior to the liquidation proceedings. To the extent

that any reinsurer of an insurance company in liquidation would

have been required under any agreement pertaining to reinsurance

to post letters of credit or other security prior to an order of

liquidation to cover such reserves reflected upon a statement

required to post letters of credit or other security to cover

such reserves after a company has been placed in liquidation or

receivership. If a reinsurer shall fail to post letters of

credit or other security required by a reinsurance agreement or

the provisions of this section, the director may issue an order

barring such reinsurer from thereafter reinsuring any insurance

company which is incorporated under the laws of the state of

Missouri or admitted to do business in the state of Missouri.



7. The provisions of this section shall become effective on

January 1, 1992, and shall be applicable to the financial

statements of a reinsurer as of December 31, 1991.



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