Section 67.21 - Reinsurance and Excess Insurance Contract Provisions(1) Specific excess coverage limit for each group shall be at least $5,000,000 per occurrence (per claim for disease). Groups composed of businesses with a high risk of multiple injury from a single occurrence may be required to maintain higher limits.(2)Retention. The retention allowed for a group's specific excess policy shall be actuarially sound and shall be not more than 30% of the net premium of the group up to a maximum of $500,000. The maximum retention may be revisited after groups have been in operation for three years.(3) Aggregate excess insurance shall attach at 105% of standard premium, and groups may choose their aggregate limit from the following two options: Option A: An amount not less than 50% of the group's in-force premium of which the first $1,000,000 of this aggregate reinsurance coverage must be total reimbursement reinsurance and the remainder may be total reimbursement reinsurance or financial reinsurance.
Option B: An amount of not less than ten times the specific retention, all of which shall be total reimbursement insurance. Groups with in-force premium in excess of $15,000,000, shall obtain additional reinsurance, which may be financial reinsurance, in the amount of 50% of the in-force premium in excess of $15,000,000.
The aggregate excess insurance or reinsurance requirements may be revisited after groups have been in operation for three years.
(4) No more than one group shall be covered by any contract or policy of excess insurance or reinsurance and the named insured shall be the group or its statutory successor in interest.(5) Except as otherwise provided in 211 CMR 67.21, reinsurers and excess insurers shall be subject to the Commissioner's approval, and shall meet all of the following criteria: (a) They shall be licensed, admitted or otherwise authorized to transact insurance or reinsurance business in the Commonwealth; and,(b) They shall be classed, according to the following table, in either the top two categories by one of the rating agencies, or receive at least the minimum acceptable rating from two of the rating agencies shown below: | Top Two Categories | Minimum Acceptable Rating |
A. M. Best & Company | A++, | A+ | A- |
Duff & Phelps | AAA, | AA+ | AA |
Moody's Investors Services | AAA, | AA1 | AA2 |
Standard & Poor Corporation | AAA, | AA | A |
The requirements of 211 CMR 67.21(5)(b) may be waived annually, in whole or in part, by the Commissioner as applicable to a group with a minimum rating of "A" from any rating agency named in 211 CMR 67.21(5)(b) upon a determination by the Division that the reinsurer or excess insurer is financially strong and that the condition of the reinsurance/excess insurance market is such that compliance would place undue financial hardship on a particular group.
(c) The Underwriters at Lloyd's of London are specifically approved for reinsurance, provided their policies comply with 211 CMR 67.21(7).(6) No contract or policy of specific or aggregate excess insurance or reinsurance shall be recognized by the Commissioner in considering the ability of the group to fulfill its financial obligations unless such contract or policy shall contain the following statement: "This policy is in compliance with all the provisions of 211 CMR 67.21(7). Provisions at variance with 211 CMR 67.21(7) will be automatically amended to comply with that regulation."
(7) The policy or contract shall be subject to the following provisions, whether included or not: (a)Cancellation: the policy or contract shall not be cancelable except upon at least 60 days written notice by registered or certified mail to the other party to the policy or contract and to the Commissioner;(b)Renewal: the policy or contract is automatically renewable at the expiration of the contract or policy period unless written notice of intent not to renew is given at least 60 days prior to such expiration by the party desiring to cancel or non-renew the policy or contract by registered or certified mail to the other party to the policy or contract and to the Commissioner;(c)Claim Handling: the excess carrier or reinsurer agrees to be subject to the claims handling standards of M.G.L. c. 152 and c. 176D and any rules or regulations promulgated thereunder.(d)Insolvency Clause: the bankruptcy or insolvency of the group will not relieve the excess insurer(s) or reinsurer(s) of their duties and liabilities under the policy.(e)Default by the Group: the excess carrier or reinsurer will, in the event of the default of the group, continue to provide information and services with respect to its obligations under the contract or policy to any service agent appointed by a receiver.(f)Intermediary Clause: if the reinsurance contract is negotiated through an intermediary all payments by the group to the intermediary shall be deemed to be payments to the reinsurer; provided, however, that all payments by the reinsurer to the intermediary shall be deemed to be payments to the group only to the extent that they are actually received by the group.(g)Offset Clause: the policy or contract may contain a provision permitting offset of any balances, whether on account, premiums, commissions, claims, losses, loss adjustment expenses, salvage, or any other amounts due from one party to the other under the agreement; provided, however, that in the event of liquidation or insolvency, the right of offset shall be limited to offset within the particular policy year or contract year.(h)Sunset Clauses: are permitted only for approved financial reinsurance products referred to in 211 CMR 67.21(8). The excess policy or reinsurance contract shall be concurrent with the underlying workers' compensation certificates issued by the group. Clauses requiring the group to report all claims by a certain date and eliminating a reinsurer's or excess insurer's liability for claims not reported by that date, or clauses which force a commutation of losses as of a certain date are not permitted. All reinsurance shall cover all claims arising during the term of the contract on an occurrence basis.(8) Finite risk or financial reinsurance is permitted only for that portion of the aggregate excess coverage specified in 211 CMR 67.21(3). Loss portfolio transfers, time and distance contracts, and all other methods of transferring investment or timing risk alone are excluded.Amended by Mass Register Issue 1320, eff. 8/26/2016.