| (a) Except as provided under Insurance Code §493.002(a-1)
for certain county mutual insurance companies operating under Insurance
Code §912.056, an insurer may take credit for reinsurance ceded
to an assuming insurer that has been certified as an assuming insurer
in this state pursuant to Insurance Code §493.1033 and this subchapter.
The assuming insurer must be certified at all times for which statutory
financial statement credit for reinsurance is claimed by the ceding
insurer.
(b) The credit allowed will be based on the security
held by or on behalf of the ceding insurer in accordance with a rating
assigned to the certified assuming insurer by the Commissioner. The
security must be in a form consistent with the provisions of Insurance
Code §493.1033(a)(2) and §493.1036(d) and this subchapter.
(c) The amount of security required in order for full
credit to be allowed must correspond with the following requirements:
(1) The minimum reduced amounts of security that must
be withheld for full credit are stated in Figure: 28 TAC §7.621(c)(1):
Attached Graphic
(2) Affiliated reinsurance agreements are eligible
for the same reduced security requirements as non-affiliated reinsurance
agreements.
(3) A certified assuming insurer may defer posting
security for catastrophe recoverables for a period up to one year
from the date of the first instance of a liability reserve entry by
the ceding company as a result of a loss from a catastrophic occurrence
that is recognized by the Commissioner. The one-year deferral period
is contingent on the certified assuming insurer continuing to pay
claims in a timely manner. Deferral of posting collateral for reinsurance
recoverables related to a catastrophic occurrence under this subsection
are permitted for only the following lines of business as reported
on the NAIC annual financial statement:
(A) Line 1: Fire;
(B) Line 2: Allied lines;
(C) Line 3: Farmowners multiple peril;
(D) Line 4: Homeowners multiple peril;
(E) Line 5: Commercial multiple peril;
(F) Line 9: Inland marine;
(G) Line 12: Earthquake; and
(H) Line 21: Auto physical damage.
(4) A ceding insurer may take credit for reinsurance
under this section only with respect to a reinsurance agreement entered
into or renewed on or after the effective date that the assuming insurer
is certified under this subchapter. Any reinsurance agreement entered
into prior to the effective date of the assuming insurer's certification
that is subsequently amended after the effective date of the certification
of the assuming insurer, or a new reinsurance agreement, covering
any risk for which collateral was provided previously, will only be
subject to this section with respect to losses incurred and reserves
reported from and after the effective date of the amendment or new
agreement.
(5) Nothing in this section prohibits the parties to
a reinsurance agreement from agreeing to provisions establishing security
requirements that exceed the minimum security requirements established
for certified assuming insurers under this section.
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