P.R. Laws tit. 26, § 4029
(1) The amounts that are to be recovered by the liquidator from the reinsurers shall not be reduced as a result of the receivership proceedings, notwithstanding the fact that it be so provided in the reinsurance contract or in any other agreement, or that nothing was provided on the matter. A payment made directly by the reinsurer to an insured party or other creditor shall not diminish the obligation of the reinsurer with respect to the estate of the insurer. This section shall apply to all reinsurance contracts of the insurer, including but not limited to treaty reinsurance, quota share reinsurance, facultative reinsurance or a fronting or captive reinsurance arrangements.
(2) Except as otherwise provided in subsection (1) of this section, the amount recoverable by the liquidator from a reinsurer shall be paid by the reinsurer under one or more reinsurance contracts based on:
(a) Proof of payment of the insured claim by a guaranty association, the insurer, or the liquidator or rehabilitator, to the extent of the amount paid, or
(b) the allowance of the claim pursuant to § 4040 of this title, or according to a liquidation order or rehabilitation plan.
(3) If an insurer takes credit for a reinsurance contract in a filing or submission made to the Commissioner and the reinsurance contract does not contain the provisions required with respect to the obligations of reinsurers in the event of insolvency of the reinsured parties, said reinsurance contract shall be considered to contain the provisions required with respect to the obligations of reinsurers in the event of insolvency of the reinsured parties in order to be able to obtain credit for reinsurance, or other applicable statutes.
(4) Any reinsurance contract that under subsection (3) of this section is presumed or inferred to contain certain provisions, shall be considered to contain the following provision:
“In the event of insolvency and the appointment of a liquidator or rehabilitator, the reinsurer’s obligation shall be payable to the ceding insurer or to the liquidator or rehabilitator without any diminution whatsoever due to insolvency or failure of the liquidator or rehabilitator to pay all or a portion of the claim. Payment shall be made upon either:
(a) Proof of payment of the claim by the guaranty association, the insurer, or the liquidator or rehabilitator up to the sum paid, or
(b) allowance of the claim under § 4040 of this title or according to a rehabilitation plan or liquidation order.”
(5) The liquidator or rehabilitator, in accordance with the terms of the contract, shall give written notice to each reinsurer obligated in relation to each pending claim against the reinsured party. The liquidator or rehabilitator’s failure to give notice of pending claims pursuant to the provisions of the reinsurance contract, shall not excuse the obligation of the reinsurer under the contract, unless the reinsurer is prejudiced by the receiver’s failure, in which case, the reinsurer’s obligations shall be reduced only to the extent of the prejudice. A reinsurer may assert, at its own expense, in a proceeding in which a claim is to be adjudicated, any defense or defenses available to the reinsured party, liquidator or rehabilitator.
(6) The entry of a rehabilitation or liquidation order shall not be construed as a breach or an anticipatory breach of a reinsurance contract, nor shall the same be grounds for retroactive revocation or cancellation of any reinsurance contract by the reinsurer.
(7) In the event that a reinsurer’s payment to a rehabilitator or liquidator of a ceding insurer is later determined to be a payment in excess of the amounts owed to the insurer, said excess shall be credited against future payments owed to the liquidator or rehabilitator, or shall be repaid to the reinsurer as an administrative expense pursuant to § 4039 of this title. Any repayment shall be limited to the remainder of the estate.
History —Ins. Code, added as § 40.290 on Aug. 17, 1991, No. 72, § 1; Dec. 14, 2007, No. 206, § 28.