3 Colo. Code Regs. § 702-3-3-5-2

Current through Register Vol. 47, No. 24, December 25, 2024

Section 3 CCR 702-3-3-5-2 - Scope and Purpose

A. The Colorado Division of Insurance recognizes that licensed insurers routinely enter into reinsurance agreements for many legitimate purposes. These purposes can include relief to the ceding insurer from strain to surplus, and may legitimately limit the amount of risk transferred from the ceding company to the assuming company.

B. It is improper for a licensed insurer to consider any contract as a reinsurance agreement if the principal purpose is not true risk transfer. If, in substance or effect, the expected potential liability of the ceding insurer remains basically unchanged by the reinsurance transaction, notwithstanding certain risk elements in the reinsurance agreement, such as catastrophic loss, the contracts violate:

1. Sections 10-3-109 and 10-3-208, C.R.S., relating to financial statements that do not properly reflect the financial condition of the ceding insurer;

2. Section 10-3-702, C.R.S., relating to credit for reinsurance, thus resulting in a ceding insurer improperly reducing liabilities or establishing assets for reinsurance ceded; and

3. Sections 10-1-110(1)(i) and 10-1-110(1)(j), C.R.S., and Colorado Insurance Regulation 3-1-7 relating to creating a situation that may be hazardous to policyholders and the people of the state of Colorado.

C. The purpose of this regulation is to establish requirements for acceptable reinsurance agreements to ensure that ceding insurers operate in a sound financial manner, correctly report their financial condition on required financial statements, and properly reduce liabilities or establish assets for reinsurance ceded. These requirements are necessary to protect the ceding insurers' policy and contract holders and the people of the State of Colorado.

3 CCR 702-3-3-5-2

37 CR 20, October 25,2014, effective 11/15/2014

37 CR 20, October 25,2014, effective 1/1/2015

37 CR 23, December 10, 2014, effective 1/1/2015

38 CR 17, September 10, 2015, effective 10/1/2015

39 CR 05, March 10, 2016, effective 4/1/2016

39 CR 14, July 25, 2016, effective 8/15/2016

39 CR 23, December 10, 2016, effective 1/1/2017

40 CR 03, February 10, 2017, effective 3/15/2017

40 CR 05, March 10, 2017, effective 4/1/2017

40 CR 13, July 10, 2017, effective 8/1/2017

40 CR 17, September 10, 2017, effective 11/1/2017

43 CR 06, March 25, 2020, effective 4/15/2020

44 CR 03, February 10, 2021, effective 3/15/2021

44 CR 23, December 10, 2021, effective 1/1/2022

46 CR 03, February 10, 2023, effective 3/2/2023