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TITLE 28INSURANCE
PART 1TEXAS DEPARTMENT OF INSURANCE
CHAPTER 7CORPORATE AND FINANCIAL REGULATION
SUBCHAPTER FREINSURANCE
RULE §7.607Nonlicensed Insurer May Become Trusteed Reinsurer

(a) Credit for insurance ceded to an assuming insurer which maintains a trust fund in a qualified United States financial institution. Pursuant to the Insurance Code, Article 3.10, §(b)(3), and Article 5.75-1, §(b)(3), the Texas Department of Insurance shall allow credit for insurance ceded to an assuming insurer which maintains a trust fund in a qualified United States financial institution for the payment of the valid claims of its United States policyholders and ceding insurers, their assigns, and successors in interest. The assuming insurer shall report annually to the Texas Department of Insurance information substantially the same as that required to be reported on the National Association of Insurance Commissioners (NAIC) annual statement form by licensed insurers to enable the Texas Department of Insurance to determine the sufficiency of the trust fund.

(b) Three types of trusteed reinsurers.

  (1) The trust fund for a single assuming insurer shall consist of a trusteed account representing the assuming insurer's liabilities attributable to business written in the United States and, in addition, include a trusteed surplus of not less than $20 million. The single assuming insurer shall file the appropriate documents set forth in §7.606(b) and (d) of this title (relating to Accredited Reinsurers).

  (2) The trust fund for a group of individual unincorporated underwriters shall consist of a trusteed account representing the group's liabilities attributable to business written in the United States and, in addition, include a trusteed surplus of not less than $100 million and the group shall make available to the Texas Department of Insurance an annual certification by the group's domiciliary regulator and its independent public accountants of the solvency of each underwriter.

  (3) The trust fund for a group of incorporated insurers under common administration which has continuously transacted an insurance business for at least three years, which is under the supervision of the Department of Trade and Industry of the United Kingdom, and which has aggregate policyholders' surplus of $10 billion, shall consist of a trusteed account representing the group's several liabilities attributable to business written in the United States pursuant to reinsurance contracts issued in the name of the group and, in addition, include a trusteed surplus of not less than $100 million which shall be jointly for the benefit of United States insurers ceding business to any member of the group. Each member of the group shall make available to the Texas Department of Insurance an annual certification by the member's domiciliary regulator and its independent public accountants of the solvency of each member. This specific type of trusteed reinsurer is authorized under the Insurance Code, Article 5.75-1, §(b)(3), only.

(c) Form of trust. Such trust shall be established in a form approved by the Texas Department of Insurance and shall provide as follows.

  (1) Contested claims shall be valid and enforceable out of funds in trust to the extent remaining unsatisfied 30 days after entry of the final order of any court of competent jurisdiction in the United States.

  (2) Legal title to the assets of the trust shall be vested in the trustees for the benefit of the grantor's United States policyholders and ceding insurers, their assigns, and successors in interest.

  (3) The trust and the assuming insurer shall be subject to examination as determined by the Texas Department of Insurance.

  (4) The trust shall remain in effect for as long as the assuming insurer shall have outstanding obligations due under the reinsurance agreements subject to the trust.

  (5) Not later than February 28 of each year the trustees of the trust shall report to the Texas Department of Insurance in writing and set forth the balance of the trust, list the trust's investments at the preceding year end, certify the date of termination of the trust, if so planned, or certify that the trust shall not expire prior to the next following December 31.

  (6) The grantor of the trust shall notify the Texas Department of Insurance of any amendment(s) to the trust within 10 business days of adoption of the amendment(s). If the commissioner of insurance determines subsequent to receipt of this notice that the amendment is not acceptable and is not brought into compliance with the Texas Department of Insurance rules, the trusteed status of the reinsurer shall be automatically revoked. Notice of revocation shall be provided by certified mail to the most recent address of the trusteed reinsurer according to the records of the Texas Department of Insurance. The trusteed reinsurer may request a public hearing to show compliance and seek reinstatement within 20 days of notification.


Source Note: The provisions of this §7.607 adopted to be effective August 16, 1990, 15 TexReg 4435; amended to be effective September 30, 1993, 18 TexReg 6329.

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