Section 031-735-3 - ExemptionsThis rule does not apply to:
1. Reinsurance of: A. Policies that satisfy the criteria for exemption set forth in 02-031 CMR §§830(6)(F) or (G); and which are issued before the effective date of this rule;B. Portions of policies that satisfy the criteria for exemption set forth in 02-031 CMR §830(6)(E) and which are issued before the effective date of this rule;C. Any universal life policy that meets all of the following requirements: (1) The secondary guarantee period, if any, is five years or less;(2) Specified premium for the secondary guarantee period is not less than the net level reserve premium for the secondary guarantee period based on the Commissioners Standard Ordinary (CSO) valuation tables and valuation interest rate applicable to the issue year of the policy; and(3) The initial surrender charge is not less than 100% of the first year annualized specified premium for the secondary guarantee period;D. Credit life insurance;E. Any variable life insurance policy that provides for life insurance, the amount or duration of which varies according to the investment experience of any separate account or accounts; nor F. Any group life insurance certificate unless the certificate provides for a stated or implied schedule of maximum gross premiums required in order to continue coverage in force for a period in excess of one year.2. Reinsurance ceded to an assuming insurer that, at the time the risk is ceded:A. Is certified as a reinsurer in this State pursuant to 24-A M.R.S. §731-B(1) (B-2):B. Is eligible for recognition by reciprocity for credit for reinsurance pursuant to 24-A M.R.S. §731-B(1) (B-3);C. Maintains a multi-beneficiary trust fund in compliance with 24-A M.R.S. §731-B(1)(C); or D. Maintains at least $250,000,000 in capital and surplus as determined in accordance with 24-A M.R.S. §901-A, excluding the impact of any permitted or prescribed practices; and is either: (1) Licensed in at least 26 states; or(2) Licensed in at least 10 states and licensed or accredited in a total of at least 35 states.3. Reinsurance ceded to an assuming insurer that is licensed as an insurance carrier or accredited as a reinsurer in this State, or is domiciled and licensed in another state that employs standards regarding credit for reinsurance, and meets the requirements of 02-031 CMR 740, Subsection 4(F) and, as applicable, Section 5, 8, or 9, and that, in addition: A.(1) Prepares statutory financial statements without any departures from NAIC statutory accounting practices and procedures pertaining to the admissibility or valuation of assets or liabilities that increase the assuming insurer's reported surplus and are material enough that they need to be disclosed in the assuming insurer's financial statement pursuant to Statement of Statutory Accounting Principles No. 1 ("SSAP 1"); and(2) Is not in a Company Action Level Event, Regulatory Action Level Event, Authorized Control Level Event, or Mandatory Control Level Event, as those terms are defined in 24-A M.R.S. §6451(8), when its risk-based capital (RBC) is calculated without deviation in accordance with the life RBC report, including overview and instructions for companies; orB. Is not an affiliate, as defined in 24-A M.R.S. §222(2)(A), of either the ceding insurer or any insurer that directly or indirectly ceded the business to that ceding insurer, and: (1) Is licensed or accredited in at least 10 states (including its state of domicile), and is not licensed in any state as a captive, special purpose vehicle, special purpose financial captive, special purpose life reinsurance company, limited purpose subsidiary, or any other similar licensing regime; and(2) Is not below 500% of the Authorized Control Level Risk-Based Capital, as that term is defined in 24-A M.R.S. §6451(8)(C), when its risk-based capital (RBC) is calculated without deviation in accordance with the life RBC report, including overview and instructions for companies, without recognition of any departures from NAIC statutory accounting practices and procedures pertaining to the admission or valuation of assets or liabilities that increase the assuming insurer's reported surplus.4. Reinsurance not otherwise exempt under Subsections 1 through 3 if the Superintendent, after consulting with the NAIC Financial Analysis Working Group (FAWG), or other group of regulators designated by the NAIC for this purpose, determines under all the facts and circumstances that all of the following apply: A. The risks are clearly outside of the intent and purpose of this rule (as described in Section 1 above);B. The risks are included within the scope of this rule only as a technicality; andC. The application of this rule to those risks is not necessary to provide appropriate protection to policyholders. The Superintendent shall publicly disclose any decision made pursuant to this Subsection to exempt a reinsurance treaty from this rule, as well as the general basis therefor (including a summary description of the treaty). Drafting Note:The exemption set forth in Subsection 3(4) was added to address the possibility of unforeseen or unique transactions. The NAIC recommended that states adopt this exemption, and created a guidance process for the states, in recognition that foreseeing every conceivable type of reinsurance transaction is impossible; that in rare instances unanticipated transactions might get caught up in this rule purely as a technicality; and that regulatory relief in those instances may be appropriate. The example that was given when the NAIC developed this exemption pertained to bulk reinsurance treaties where the ceding insurer was exiting the type of business ceded. The exemption should not be used with respect to so-called "normal course" reinsurance transactions; rather, those transactions should either fit within one of the standard exemptions set forth in Subsections 4(1) through 4(3) or meet the substantive requirements of this rule.
02-031 C.M.R. ch. 735, § 3