S.D. Admin. R. 20:06:31:11

Current through Register Vol. 50, page 159, June 17, 2024

Section 20:06:31:11 - Trust agreements qualified under SDCL 58-14-16 - Additional conditions applicable to reinsurance agreements - Assets

A reinsurance agreement which is entered into in conjunction with a trust agreement and the establishment of a trust account may contain provisions that require the following:

(1) Require the assuming insurer to enter into a trust agreement, specifying what the agreement is to cover, and to establish a trust account for the benefit of the ceding insurer;

(2) Require the assuming insurer, before depositing assets with the trustee, to execute assignments or endorsements in blank or to transfer legal title to the trustee of all shares, obligations, or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may as necessary negotiate these assets without consent or signature from the assuming insurer or any other entity;

(3) Require that all settlements of account between the ceding insurer and the assuming insurer be made in cash or its equivalent; and

(4) Stipulate that the assuming insurer and the ceding insurer agree that the assets in the trust account, established pursuant to the provisions of the reinsurance agreement, may be withdrawn by the ceding insurer at any time and may be utilized and applied only for the following purposes by the ceding insurer or its successors in interest by operation of law, including any liquidator, rehabilitator, receiver, or conservator of the company, without diminution because of insolvency on the part of the ceding insurer or the assuming insurer, only for the following purposes:

(a) To pay or reimburse the ceding insurer for:

(i) The assuming insurer's share under the specific reinsurance agreement of premiums returned, but not yet recovered from the assuming insurer, to the owners of policies reinsured under the reinsurance agreement because of cancellations of the policies;

(ii)The assuming insurer's share of surrenders and the benefits or losses paid by the ceding insurer, pursuant to the provisions of the policies reinsured under the reinsurance agreement; and

(iii) Any other amounts necessary to secure the credit or reduction from liability for reinsurance taken by the ceding insurer; or

(b) To make payment to the assuming insurer of amounts held in the trust account in excess of the amount necessary to secure the credit or reduction from liability for reinsurance taken by the ceding insurer.

S.D. Admin. R. 20:06:31:11

22 SDR 52, effective 10/25/1995; 44 SDR 71, effective 10/23/2017

General Authority: SDCL 58-14-17.

Law Implemented: SDCL 58-14-17.