N.J. Admin. Code § 11:2-28.7A

Current through Register Vol. 57, No. 1, January 6, 2025

Section 11:2-28.7A - Credit for reinsurance from certified reinsurers

(a) Pursuant to N.J.S.A. 17:51B-2.g, the Commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements set forth at N.J.A.C. 11:2-28.3, 28.4, 28.5, or 28.6 that has been certified as a reinsurer in this State at all times for which statutory financial statement credit for reinsurance is claimed pursuant to this section. The credit allowed shall be based upon the security held by or on behalf of the ceding insurer, in accordance with a rating assigned to the certified reinsurer pursuant to this section. The security shall be in a form consistent with the provisions at N.J.S.A. 17:51B-2.g and this subchapter. The amount of security required in order for full credit to be allowed shall correspond with the requirements as set forth at Exhibit A in the Appendix to this subchapter, incorporated herein by reference.

(b) Affiliated reinsurance transactions shall receive the same opportunity for reduced security requirements as all other reinsurance transactions.

(c) The Commissioner shall require the certified reinsurer to post 100 percent security, for the benefit of the ceding insurer or its estate, upon the entry of an order of rehabilitation, liquidation, or conservation against the ceding insurer.

(d) In order to facilitate the prompt payment of claims, a certified reinsurer shall not be required to post security for catastrophe recoverables for a period of one year from the date of the first instance of a liability reserve entry by the ceding company as a result of a loss from a catastrophic occurrence as recognized by the Commissioner. The one-year deferral period is contingent upon the certified reinsurer continuing to pay claims in a timely manner. Reinsurance recoverables for only the following lines of business as reported on the NAIC annual financial statement related specifically to the catastrophic occurrence will be included in the deferral:

1. Line 1: Fire;

2. Line 2: Allied Lines;

3. Line 3: Farmowners multiple peril;

4. Line 4: Homeowners multiple peril;

5. Line 5: Commercial multiple peril;

6. Line 9: Inland Marine;

7. Line 12: Earthquake; and

8. Line 21: Auto physical damage.

(e) Credit for reinsurance under this section shall apply only to reinsurance contracts entered into or renewed on or after the effective date of the certification of the assuming insurer. Any reinsurance contract entered into prior to the effective date of the certification of the assuming insurer that is subsequently amended after the effective date of the certification of the assuming insurer, or a new reinsurance contract, covering any risk for which collateral was provided previously, shall only be subject to this section with respect to losses incurred and reserves reported from and after the effective date of the amendment or new contract.

(f) Nothing in this section shall prohibit the parties to a reinsurance agreement from agreeing to provisions establishing security requirements that exceed the minimum security requirements established for certified reinsurers under this section.

(g) In addition to the clauses required under N.J.A.C. 11:2-28.12, reinsurance contracts entered into or renewed under this section through N.J.A.C. 11:2-28.7D shall include a proper funding clause, which requires the certified reinsurer to provide and maintain security in an amount sufficient to avoid the imposition of any financial statement penalty on the ceding insurer under this section for reinsurance ceded to the certified reinsurer.

(h) The Commissioner shall comply with all reporting and notification requirements that may be established by the NAIC with respect to certified reinsurers and qualified jurisdictions.

(i) If a certified reinsurer maintains a trust to fully secure its obligations subject to N.J.A.C. 11:228.6, and chooses to secure its obligations incurred as a certified reinsurer in the form of a multibeneficiary trust, the certified reinsurer shall maintain separate trust accounts for its obligations incurred under reinsurance agreements issued or renewed as a certified reinsurer with reduced security as permitted by this subsection or comparable laws of other United States jurisdictions and for its obligations subject to N.J.A.C. 11:2-28.6. It shall be a condition to the grant of certification that the certified reinsurer shall have bound itself, by the language of the trust and agreement with the commissioner with principal regulatory oversight of each such trust account, to fund, upon termination of any such trust account, out of the remaining surplus of such trust any deficiency of any other such trust account.

(j) The minimum trusteed surplus requirements provided in N.J.A.C. 11:2-28.6 are not applicable with respect to a multibeneficiary trust maintained by a certified reinsurer for the purpose of securing obligations incurred under this section, except that such trust shall maintain a minimum trusteed surplus of $ 10,000,000.

(k) With respect to obligations incurred by a certified reinsurer under this section, if the security is insufficient, the Commissioner shall reduce the allowable credit by an amount proportionate to the deficiency, and may impose further reductions in allowable credit upon finding that there is a material risk that the certified reinsurer's obligations will not be paid in full when due.

N.J. Admin. Code § 11:2-28.7A

New Rule, R.2012 d.154, effective 9/4/2012.
See: 44 N.J.R. 360(a), 44 N.J.R. 2169(a).

Amended by 54 N.J.R. 1735(a), effective 9/6/2022