18 Del. Admin. Code § 1002-2.0

Current through Register Vol. 28, No. 5, November 1, 2024

Section 1002-2.0 - Preamble

2.1 The Delaware Insurance Department recognizes that licensed insurers routinely enter into reinsurance agreement that yield legitimate relief to the ceding insurer from strain to surplus.

2.2 However, it is improper for a licensed insurer, in the capacity of ceding insurer, to enter into reinsurance agreements for the principal purpose of producing significant surplus aid for the ceding insurer, typically on a temporary basis, while not transferring all of the significant risks inherent in the business being reinsured. In substance or effect, the expected potential liability to the ceding insurer remains basically unchanged by the reinsurance transaction, notwithstanding certain risk elements in the reinsurance agreement, such as catastrophic mortality or extraordinary survival. The terms of such agreements referred to herein and described in section 4.0 violate:

2.2.1 18 Del.C. § 526 which requires that financial statements properly reflect the financial condition of the ceding insurer;

2.2.2 18 Del.C. § 912 which requires that reinsurance reserve credits, accurately reflect a ceding insurer's liabilities or establish assets for reinsurance ceded; and

2.2.3 18 Del.C. § 1105, which prohibits "wash" transactions.

18 Del. Admin. Code § 1002-2.0