Nev. Admin. Code § 681A.460

Current through December 12, 2024

Section 681A.460 - Assignment of ratings by Commissioner; factors for making determination; adjustment of required security; periodic reporting requirements for certified reinsurers; reevaluation of rating; application of upgraded or downgraded rating to reinsurance contracts

1. Except as otherwise provided in NAC 681A.500, the Commissioner will assign a rating to each certified reinsurer pursuant to NRS 681A.1554. When determining the rating for a certified reinsurer, the Commissioner will evaluate the certified reinsurer as a separate entity from any group in which it may be a member, but the Commissioner may give consideration to the group in which a certified reinsurer is a member if the Commissioner determines such consideration would be appropriate. The Commissioner may evaluate an association that includes incorporated and individual unincorporated underwriters that has been approved to do business as a certified reinsurer on the basis of its group rating.

2. The Commissioner will determine the maximum rating that he or she may assign to a certified reinsurer on the basis of the financial strength ratings assigned to the certified reinsurer by two or more rating agencies determined to be acceptable by the Commissioner. The Commissioner will use the lowest financial strength rating received by the certified reinsurer to establish a maximum rating for the certified reinsurer in accordance with the following table:

Maximum rating	A.M. Best Company, Inc.	S&P Global Ratings	Moody's Investors Service, Inc.	Fitch Ratings
Secure - 1	A++	AAA	Aaa	AAA
Secure - 2	A+	AA+, AA, AA-	Aa1, Aa2, Aa3	AA+, AA, AA-
Secure - 3	A	A+, A	A1, A2	A+, A
Secure - 4	A-	A-	A3	A-
Secure - 5	B++, B+	BBB+, BBB, BBB-	Baa1, Baa2, Baa3	BBB+, BBB, BBB-
Vulnerable - 6	B, B-, C++, C+, C, C-, D, E, F	BB+, BB, BB-, B+, B, B-, CCC, CC, D, R, SD	Ba1, Ba2, Ba3, B1, B2, B3, Caa, Ca, C	BB+, BB, BB-, B+, B, B-, CCC, CC, C

3. When determining whether to assign the maximum rating pursuant to subsection 2 or a lower rating to a certified reinsurer, the Commissioner may consider factors which include, without limitation:

(a) The business practices of the certified reinsurer in dealing with its ceding insurers, including, without limitation, its record of compliance with the terms and obligations of reinsurance contracts.

(b) For a certified reinsurer domiciled in the United States, a review of the most recent annual financial statement, Schedule F for property or casualty insurers or Schedule S for life and health insurers, as appropriate, filed by the insurer.

(c) For a certified reinsurer not domiciled in the United States, an annual review of Form CR-F for property or casualty insurers or Form CR-S for life and health insurers, as appropriate, filed by the insurer.

(d) The reputation of the certified reinsurer for prompt payment of claims under reinsurance contracts based on an analysis of the reporting of overdue reinsurance recoverables by ceding insurers on Schedule F, including, without limitation, the proportion of obligations that are more than 90 days past due or are in dispute, with specific attention given to obligations payable to companies that are in administrative supervision or receivership.

(e) Any regulatory action against the certified reinsurer.

(f) For a certified reinsurer domiciled in the United States, financial statements audited on the basis of generally accepted accounting principles, regulatory filings and actuarial opinions.

(g) For a certified insurer domiciled outside of the United States, the immediately preceding 3 years' financial statements audited on the basis of generally accepted accounting principles in the United States or basis statements audited on the basis of international financial reporting standards which include an audited footnote reconciling equity and net income on the basis of generally accepted accounting principles in the United States or, with the permission of the Commissioner, which are certified by an officer of the certified reinsurer to be reconciled with generally accepted accounting principles in the United States, regulatory filings and actuarial opinions as filed with the appropriate supervisor in the jurisdiction.

(h) The report of an independent auditor on the financial statements described in paragraph (f) or (g), as applicable, of the certified reinsurer.

(i) The liquidation priority of obligations to a ceding insurer in the domiciliary jurisdiction of the certified reinsurer during an insolvency proceeding.

(j) The participation of the certified reinsurer in any solvent scheme of arrangement or similar procedure which involved ceding insurers domiciled in the United States. A certified reinsurer shall provide notice to the Commissioner before the certified reinsurer proposes to participate in a solvent scheme of arrangement or similar procedure.

(k) Any other information that the Commissioner determines is relevant.

4. The Commissioner may adjust the security that a certified reinsurer is required to post pursuant to paragraph (b) of subsection 2 of section 8 to protect the liabilities of the certified reinsurer to its ceding insurers on the basis of the reputation of the certified reinsurer for prompt payment of claims as described in paragraph (d) of subsection 3. The Commissioner will, at a minimum, deem a certified insurer to be one rating lower for the purpose of posting security if the Commissioner finds that:

(a) More than 15 percent of the ceding insurers of the certified reinsurer have reinsurance recoverables on paid losses which are overdue by 90 days or more that are not in dispute and exceed $100,000 for each ceding insurer; or

(b) The aggregate amount of reinsurance recoverables on paid losses which are overdue by 90 days or more that are not in dispute exceeds $50,000,000.

5. Each certified insurer shall submit to the Commissioner with its initial application and on an ongoing basis thereafter:

(a) Notification within 10 days after any regulatory action taken against the certified reinsurer, any change in the provisions of its domiciliary license or any change in rating by an approved rating agency which includes a statement describing the action or change and the reasons therefor;

(b) Form CR-1, CR-F or CR-S, as applicable, updated annually;

(c) The information described in paragraph (f) or (g) of subsection 3, as applicable, updated annually;

(d) The report of an independent auditor on the financial statement submitted pursuant to paragraph (c), updated annually;

(e) A list of all disputed and overdue reinsurance claims regarding reinsurance assumed from ceding insurers domiciled in the United States, updated not less than annually;

(f) Certification from the domestic regulator of the certified reinsurer that the certified reinsurer is in good standing and maintains capital in excess of the highest regulatory action level of the jurisdiction; and

(g) Any other information that the Commissioner may reasonably require.

6. Upon receipt of information indicating that a rating agency has upgraded or downgraded a certified reinsurer or that some other relevant circumstance has occurred, the Commissioner will reevaluate the rating assigned to a certified reinsurer and, if the Commissioner determines that a different rating is appropriate, provide written notice to the certified reinsurer that a different rating has been assigned. If the Commissioner upgrades the rating of a certified reinsurer, the upgraded rating applies to any reinsurance contract entered into by the certified reinsurer after the date of the written notice and the previous rating applies to any reinsurance contract entered into by the certified reinsurer on or before the date of the written notice. If the Commissioner downgrades the rating of a certified reinsurer, the downgraded rating applies to all reinsurance contracts of the certified reinsurer.

7. A copy of Form CR-1, Form CR-F and Form CR-S may be obtained free of charge from the Division at the Internet address http://doi.nv.gov/Insurers/Company-Admissions/Annual-Renewals-of-Company-License/.

Nev. Admin. Code § 681A.460

Added to NAC by Comm'r of Insurance by R079-16A, eff. 11/2/2016

NRS 679B.130, 681A.130, 681A.1554