(a)(1) Credit for reinsurance shall be allowed a domestic ceding insurer as either an asset or a deduction from liability on account of reinsurance ceded only when the reinsurer meets the requirements of:

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(A) Subsection (b) of this section;

(B) Subsection (c) of this section;

(C) Subsections (d) and (h) of this section;

(D) Subsections (e), (h) and (i) of this section;

(E) Subsections (f) and (i) of this section;

(F) Subsection (g) of this section;

(G) Subsection (h) of this section; or

(H) Any regulation adopted pursuant to subsection (b) of section 38a-88.

(2) Credit shall be allowed under subsection (b), (c) or (d) of this section only as respects cessions of those kinds or classes of business which the assuming insurer is licensed or otherwise permitted to write or assume in its state of domicile, or, in the case of a United States branch of an alien assuming insurer, in the state through which it is entered and licensed to transact insurance or reinsurance. Credit shall be allowed under subsection (d) or (e) of this section only if the applicable requirements of subsection (i) of this section have been satisfied.

(b) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is licensed to transact insurance or reinsurance in this state.

(c) (1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is accredited by the commissioner as a reinsurer in this state. To be eligible for accreditation, an insurer shall (A) file with the commissioner evidence of its submission to this state’s jurisdiction, (B) submit to this state’s authority to examine its books and records, (C) be licensed to transact insurance or reinsurance in at least one state, or in the case of a United States branch of an alien assuming insurer is entered through and licensed to transact insurance or reinsurance in at least one state, (D) file annually with the commissioner a copy of its annual statement filed with the insurance department of its state of domicile and a copy of its most recent audited financial statement, and (E) demonstrate to the satisfaction of the commissioner that it has adequate financial capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from a domestic insurer. An assuming insurer shall be deemed to meet the requirements of this subparagraph if it maintains a surplus with regard to policyholders of not less than twenty million dollars at the time of accreditation and its accreditation has not been denied by the commissioner within ninety days after the date the insurer submitted its application.

(2) Each accredited reinsurer doing business in this state shall, annually, on or before the first day of March, submit to the commissioner, by electronically filing with the National Association of Insurance Commissioners, a true and complete report, signed and sworn to by its president or a vice president, and secretary or an assistant secretary, of its financial condition on the thirty-first day of December next preceding, prepared in accordance with the National Association of Insurance Commissioners annual statement instructions handbook and following those accounting procedures and practices prescribed by the National Association of Insurance Commissioners accounting practices and procedures manual, subject to any deviations in form and detail as may be prescribed by the commissioner. An electronically filed report in accordance with section 38a-53a that is timely submitted to the National Association of Insurance Commissioners shall be deemed to have been submitted to the commissioner in accordance with this subdivision.

(d) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is domiciled and licensed in, or in the case of a United States branch of an alien assuming insurer is entered through, a state that employs standards regarding credit for reinsurance substantially similar to those applicable in this state and the assuming insurer or United States branch of an alien assuming insurer (1) maintains a surplus with regard to policyholders in an amount not less than twenty million dollars, and (2) submits to the authority of this state to examine its books and records. The requirement of subdivision (1) of this subsection shall not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system.

(e) (1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that maintains a trust that complies with the requirements of subdivisions (2) and (3) of this subsection in a qualified United States financial institution, as defined in section 38a-87, for the payment of the valid claims of its United States policyholders and ceding insurers, and their assigns and successors in interest. The assuming insurer shall (A) report annually to the commissioner information substantially the same as that required to be reported in the National Association of Insurance Commissioners’ Annual Statement form by licensed insurers, to enable the commissioner to determine the sufficiency of the trust fund, and (B) submit to, and pay the expenses of, examination of its books and records by the commissioner.

(2) (A) No credit for reinsurance shall be allowed under subdivision (1) of this subsection unless:

(i) The form of the trust and any amendments to the trust have been approved by (I) the insurance regulatory official of the state of domicile of the trust, or (II) the insurance regulatory official of another state who has, pursuant to the terms of the trust instrument, accepted principal regulatory oversight of the trust;

(ii) The form of the trust and any amendments to the trust have been filed with the insurance regulatory officials of each state in which ceding insurer beneficiaries of the trust are domiciled; and

(iii) The trust instrument (I) provides that a contested claim shall be valid and enforceable upon the entry of a final order of a court of competent jurisdiction in the United States, and (II) vests legal title to its assets in its trustees for the benefit of the assuming insurer’s domestic and foreign policyholders and ceding insurers, and their assigns and successors in interest.

(B) (i) The trust shall be subject to examination by the commissioner and shall remain in effect for as long as the assuming insurer has outstanding obligations due under the reinsurance agreements subject to the trust.

(ii) Not later than March first, annually, the trustee of the trust shall (I) report to the commissioner, in writing, the balance and a list of the investments of the trust at the end of the preceding calendar year, and (II) certify to the commissioner the date of termination of the trust, if so planned, or that the trust will not expire prior to the following December thirty-first.

(3) (A) (i) In the case of a single assuming insurer, the trust shall consist of a trusteed account with funds in an amount not less than the assuming insurer’s liabilities attributable to reinsurance ceded by domestic and foreign ceding insurers and, unless otherwise provided in subparagraph (A)(ii) of this subdivision, the assuming insurer shall maintain a trusteed surplus of not less than twenty million dollars.

(ii) (I) The insurance regulatory official with principal oversight of the trust may authorize a reduction in the required trusteed surplus.

(II) For a trust over which the commissioner has principal regulatory oversight, at any time after the assuming insurer has permanently discontinued for at least three full years underwriting new business secured by the trust, the commissioner may authorize a reduction in the required trusteed surplus. Such reduction shall be made only after the commissioner finds, based on a risk assessment, that the reduced surplus level is adequate to protect domestic and foreign policyholders and ceding insurers and claimants in light of reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and shall consider all material risk factors, including, when applicable, the lines of business involved, the stability of the incurred loss estimates and the effect of the surplus requirements on the assuming insurer’s liquidity or solvency. The minimum required surplus shall not be reduced to an amount less than thirty per cent of the assuming insurer’s liabilities attributable to reinsurance ceded by domestic and foreign ceding insurers covered by the trust.

(B) In the case of an assuming insurer that is a group including incorporated and individual unincorporated underwriters:

(i) (I) For reinsurance ceded under a reinsurance agreement with an inception date prior to January 1, 1993, and not amended or renewed after said date, the trust shall consist of a trusteed account with funds in an amount not less than such underwriters’ several insurance and reinsurance liabilities attributable to business written in the United States; or

(II) For reinsurance ceded under a reinsurance agreement with an inception date on or after January 1, 1993, the trust shall consist of a trusteed account with funds in an amount not less than such underwriters’ several liabilities attributable to business ceded by domestic and foreign ceding insurers to any underwriter who is a member of the group;

(ii) In addition to a trust specified in subparagraph (B)(i)(I) or (B)(i)(II) of this subdivision, the group shall maintain, for all years of account, a trusteed surplus of which one hundred million dollars shall be held jointly for the benefit of domestic and foreign ceding insurers of any member of the group;

(iii) The incorporated members of the group shall not be engaged in any business other than underwriting as a member of the group and shall be subject to the same level of solvency regulation and solvency control by the group’s domiciliary insurance regulatory official as are the unincorporated members; and

(iv) Not later than ninety days after its financial statements are due to be filed with the group’s domiciliary insurance regulatory official, the group shall provide to the commissioner an annual certification by the group’s domiciliary insurance regulatory official of the solvency of each underwriter who is a member of the group or, if such certification is not provided by the group’s domiciliary insurance regulatory official, financial statements prepared by independent public accountants of each such underwriter.

(C) In the case of a group of incorporated underwriters under common administration:

(i) The group shall be accredited and have continuously transacted an insurance business outside the United States for at least three years immediately prior to applying for accreditation;

(ii) The trust shall consist of a trusteed account with funds in an amount not less than such underwriters’ several liabilities attributable to business ceded by domestic and foreign ceding insurers pursuant to a reinsurance contract issued in the name of the group to any underwriter who is a member of the group;

(iii) In addition to such trust, the group shall maintain (I) an aggregate policyholders’ surplus of not less than ten billion dollars, and (II) a joint trusteed surplus of which one hundred million dollars shall be held jointly for the benefit of domestic and foreign ceding insurers of any member of the group as additional security for these liabilities; and

(iv) Not later than ninety days after its financial statements are due to be filed with the group’s domiciliary insurance regulatory official, the group shall make available to the commissioner an annual certification by the group’s domiciliary insurance regulatory official of the solvency of each underwriter who is a member of the group and financial statements prepared by independent public accountants of each such underwriter.

(f) (1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is certified in accordance with section 38a-85a by the commissioner as a reinsurer in this state and such certified reinsurer maintains security in a form and amounts set forth in subdivision (3) of subsection (e) of this section or, for a multibeneficiary trust set forth in subdivision (2) of subsection (e) of section 38a-85a, in accordance with the provisions of subdivision (2) of subsection (e) of section 38a-85a.

(2) If the security is not sufficient with respect to obligations incurred by a certified reinsurer, the commissioner shall reduce the credit allowed by an amount proportionate to the deficiency and may impose further reductions in the credit allowed if the commissioner finds there is a material risk that such obligations will not be paid in full when due.

(g) (1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer meeting each of the conditions set forth below:

(A) The assuming insurer shall have its head office or be domiciled in, as applicable, and be licensed in a reciprocal jurisdiction. A “reciprocal jurisdiction” is a jurisdiction that meets one of the following:

(i) A non-United States jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority, or, in the case of a covered agreement between the United States and the European Union, is a member state of the European Union. For purposes of this subsection, a “covered agreement” is an agreement entered into pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, 31 USC Sections 313 and 314, that is currently in effect or in a period of provisional application and addresses the elimination, under specified conditions, of collateral requirements as a condition for entering into any reinsurance agreement with a ceding insurer domiciled in this state or for allowing the ceding insurer to recognize credit for reinsurance;

(ii) A United States jurisdiction that meets the requirements for accreditation under the National Association of Insurance Commissioners’ financial standards and accreditation program; or

(iii) A qualified jurisdiction, as determined by the commissioner pursuant to subsection (c) of section 38a-85a, which is not otherwise described in subparagraph (A)(i) or (A)(ii) of this subdivision and which meets certain additional requirements, consistent with the terms and conditions of in-force covered agreements, as specified by the commissioner in regulations adopted in accordance with the provisions of chapter 54.

(B) The assuming insurer shall have and maintain, on an ongoing basis, minimum capital and surplus, or its equivalent, calculated according to the methodology of its domiciliary jurisdiction, in an amount to be set forth in regulation. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it shall have and maintain, on an ongoing basis, minimum capital and surplus equivalents, net of liabilities, calculated according to the methodology applicable in its domiciliary jurisdiction, and a central fund containing a balance in amounts to be set forth in regulation.

(C) The assuming insurer shall have and maintain, on an ongoing basis, a minimum solvency or capital ratio, as applicable, which will be set forth in regulation. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it shall have and maintain, on an ongoing basis, a minimum solvency or capital ratio in the reciprocal jurisdiction where the assuming insurer has its head office or is domiciled, as applicable, and is also licensed.

(D) The assuming insurer shall agree and provide adequate assurance to the commissioner, in a form specified by the commissioner pursuant to regulation, as follows:

(i) The assuming insurer shall provide prompt written notice and explanation to the commissioner if it falls below the minimum requirements set forth in subparagraph (B) or (C) of this subdivision, or if any regulatory action is taken against it for serious noncompliance with applicable law;

(ii) The assuming insurer shall consent in writing to the jurisdiction of the courts of this state and to the appointment of the commissioner as agent for service of process. The commissioner may require that consent for service of process be provided to the commissioner and included in each reinsurance agreement. Nothing in this provision shall limit, or in any way alter, the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent such agreements are unenforceable under applicable insolvency or delinquency laws;

(iii) The assuming insurer shall consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer or its legal successor, that have been declared enforceable in the jurisdiction where the judgment was obtained;

(iv) Each reinsurance agreement shall include a provision requiring the assuming insurer to provide security in an amount equal to one hundred per cent of the assuming insurer’s liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its legal successor on behalf of its resolution estate; and

(v) The assuming insurer shall confirm that it is not presently participating in any solvent scheme of arrangement that involves this state’s ceding insurers, and agree to notify the ceding insurer and the commissioner and to provide security in an amount equal to one hundred per cent of the assuming insurer’s liabilities to the ceding insurer, should the assuming insurer enter into such a solvent scheme of arrangement. Such security shall be in a form consistent with the provisions of subsection (f) of this section and sections 38a-85a and 38a-86 and as specified in regulations adopted by the commissioner in accordance with the provisions of chapter 54.

(E) The assuming insurer or its legal successor shall provide, if requested by the commissioner, on behalf of itself and any legal predecessors, certain documentation to the commissioner, as specified by the commissioner in regulation.

(F) The assuming insurer shall maintain a practice of prompt payment of claims under reinsurance agreements, pursuant to criteria set forth in regulation.

(G) The assuming insurer’s supervisory authority shall confirm to the commissioner on an annual basis, as of the preceding December thirty-first or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, that the assuming insurer complies with the requirements set forth in subparagraphs (B) and (C) of this subdivision.

(H) Nothing in this provision precludes an assuming insurer from providing the commissioner with information on a voluntary basis.

(2) The commissioner shall timely create and publish a list of reciprocal jurisdictions.

(A) A list of reciprocal jurisdictions is published through the National Association of Insurance Commissioners’ committee process. The commissioner’s list shall include any reciprocal jurisdiction as defined under subparagraphs (A)(i) and (A)(ii) of subdivision (1) of this subsection, and shall consider any other reciprocal jurisdiction included on the National Association of Insurance Commissioners’ list. The commissioner may approve a jurisdiction that does not appear on the National Association of Insurance Commissioners’ list of reciprocal jurisdictions in accordance with criteria to be developed under regulations adopted by the commissioner in accordance with the provisions of chapter 54.

(B) The commissioner may remove a jurisdiction from the list of reciprocal jurisdictions upon a determination that the jurisdiction no longer meets the requirements of a reciprocal jurisdiction, in accordance with a process set forth in regulations adopted by the commissioner pursuant to chapter 54, except that the commissioner shall not remove from the list a reciprocal jurisdiction as defined under subparagraphs (A)(i) and (A)(ii) of subdivision (1) of this subsection. Upon removal of a reciprocal jurisdiction from this list, credit for reinsurance ceded to an assuming insurer which has its home office or is domiciled in that jurisdiction shall be allowed, if otherwise allowed pursuant to this section and sections 38a-85a to 38a-88, inclusive.

(3) The commissioner shall timely create and publish a list of assuming insurers that have satisfied the conditions set forth in this subsection and to which cessions shall be granted credit in accordance with this subsection. The commissioner may add an assuming insurer to such list if a National Association of Insurance Commissioners accredited jurisdiction has added such assuming insurer to a list of such assuming insurers or if, upon initial eligibility, the assuming insurer submits the information to the commissioner as required under subparagraph (D) of subdivision (1) of this subsection and complies with any additional requirements that the commissioner may impose by regulation, except to the extent that they conflict with an applicable covered agreement.

(4) If the commissioner determines that an assuming insurer no longer meets one or more of the requirements under this subsection, the commissioner may revoke or suspend the eligibility of the assuming insurer for recognition under this subsection in accordance with procedures set forth in regulation.

(A) While an assuming insurer’s eligibility is suspended, no reinsurance agreement issued, amended or renewed after the effective date of the suspension qualifies for credit except to the extent that the assuming insurer’s obligations under the contract are secured in accordance with section 38a-86.

(B) If an assuming insurer’s eligibility is revoked, no credit for reinsurance may be granted after the effective date of the revocation with respect to any reinsurance agreements entered into by the assuming insurer, including reinsurance agreements entered into prior to the date of revocation, except to the extent that the assuming insurer’s obligations under the contract are secured in a form acceptable to the commissioner and consistent with the provisions of section 38a-86.

(5) If subject to a legal process of rehabilitation, liquidation or conservation, as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring that the assuming insurer post security for all outstanding ceded liabilities.

(6) Nothing in this subsection shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in that reinsurance agreement, except as expressly prohibited by this section and sections 38a-85a to 38a-88, inclusive, or other applicable law or regulation.

(7) Credit may be taken under this subsection only for reinsurance agreements entered into, amended or renewed on or after October 1, 2021, and only with respect to losses incurred and reserves reported on or after the later of the date on which the assuming insurer has met all eligibility requirements pursuant to subdivision (1) of this subsection, and the effective date of the new reinsurance agreement, amendment or renewal.

(A) This subsection does not alter or impair a ceding insurer’s right to take credit for reinsurance, to the extent that credit is not available under this subsection, as long as the reinsurance qualifies for credit under any other applicable provision of this section or sections 38a-85a to 38a-88, inclusive.

(B) Nothing in this subsection shall authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement except as permitted by the terms of the agreement.

(C) Nothing in this subsection shall limit, or in any way alter, the capacity of parties to any reinsurance agreement to renegotiate the agreement.

(h) Credit shall be allowed when the reinsurance is ceded to an assuming insurer not meeting the requirements of subsection (b), (c), (d), (e), (f) or (g) of this section but only with respect to the insurance of risks located in jurisdictions where such reinsurance is required by applicable law or regulation of that jurisdiction.

(i) If the assuming insurer is not licensed, accredited or certified to transact insurance or reinsurance in this state, the credit permitted by subsection (d) or (e) of this section shall not be allowed unless the assuming insurer agrees (1) that in the event of the failure of the assuming insurer to perform its obligations under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding insurer, shall (A) submit to the jurisdiction of any court of competent jurisdiction in any state of the United States, (B) comply with all requirements necessary to give such court jurisdiction, and (C) abide by the final decision of such court or any appellate court in the event of an appeal, and (2) to designate the commissioner or a designated attorney as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the ceding company. This provision is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if such an obligation is created in the agreement.

(j) If the assuming insurer does not meet the requirements of subsection (b), (c), (d) or (g) of this section, the credit permitted by subsection (e) or (f) of this section shall not be allowed unless the assuming insurer agrees to the following conditions in the trust instrument:

(1) Notwithstanding any provision of the trust instrument, if the trust contains an amount less than the amount required under subdivision (3) of subsection (e) of this section or if the grantor of the trust has been declared insolvent or placed in receivership, rehabilitation, liquidation or a similar proceeding under the laws of its state or country of domicile, the trustee shall comply with an order of the insurance regulatory official with principal regulatory oversight of the trust or with an order of a court of competent jurisdiction that directs the trustee to transfer all trust assets to the insurance regulatory official with principal regulatory oversight of the trust;

(2) The trust assets shall be distributed by and claims filed with and valued by the insurance regulatory official with principal regulatory oversight of the trust in accordance with the laws of the trust’s state of domicile that are applicable to the liquidation of domestic insurance companies;

(3) The trustee shall distribute any trust assets or part thereof that are returned by the insurance regulatory official with principal regulatory oversight of the trust, based on such regulatory official’s determination that such assets or part thereof are not necessary to satisfy the claims of domestic and foreign ceding insurers of the grantor of the trust, in accordance with the trust instrument; and

(4) The grantor of the trust waives any right otherwise available to the grantor under law that is inconsistent with subdivisions (1) to (3), inclusive, of this subsection.

(k) (1) (A) The commissioner may suspend or revoke a reinsurer’s accreditation or certification if, after notice and hearing, the commissioner finds such reinsurer no longer meets the requirements for accreditation or certification.

(B) If a certified reinsurer’s domiciliary jurisdiction ceases to be a qualified jurisdiction, as set forth in section 38a-85a, the commissioner may suspend the reinsurer’s certification indefinitely, in lieu of revocation.

(2) The commissioner may suspend or revoke a reinsurer’s accreditation or certification without notice and a hearing if:

(A) The reinsurer waives its right to a hearing;

(B) The commissioner’s action is based on (i) regulatory action taken by a regulatory official of the reinsurer’s state of domicile, or (ii) the voluntary surrender or termination of the reinsurer’s eligibility to transact the business of insurance or reinsurance in its state of domicile or its primary certifying jurisdiction as described in subdivision (2) of subsection (a) of section 38a-85a; or

(C) The commissioner finds that immediate action is required to protect the public and a court of competent jurisdiction has not stayed the commissioner’s action.

(3) (A) While a reinsurer’s accreditation or certification is suspended, no credit shall be allowed under this section for a reinsurance contract issued or renewed by the reinsurer on or after the effective date of such suspension, except to the extent that such reinsurer’s obligations under such contract are secured in accordance with the provisions of section 38a-86.

(B) If a reinsurer’s accreditation or certification is revoked, no credit shall be allowed under this section on and after the effective date of such revocation, except to the extent that such reinsurer’s obligations under such contract are secured in accordance with the provisions of subsection (e) of section 38a-85a or section 38a-86.

(4) A reinsurer whose certification has been suspended, revoked or voluntarily surrendered or is inactive shall be treated as a certified reinsurer required to secure one hundred per cent of its obligations, except that this requirement shall not apply to a reinsurer whose certification has been suspended or is inactive if the commissioner continues to assign a high rating to such reinsurer pursuant to section 38a-85a.

(5) Any person aggrieved by the action of the commissioner in revoking or suspending an accreditation or a certification may appeal therefrom in accordance with the provisions of section 38a-19.

(l) (1) A domestic ceding insurer shall manage its reinsurance recoverables in proportion to its own book of business. Such insurer shall notify the commissioner not later than thirty days after (A) reinsurance recoverables from any single assuming insurer or group of affiliated assuming insurers exceed fifty per cent of the domestic ceding insurer’s last reported surplus to policyholders, or (B) the domestic ceding insurer determines that reinsurance recoverables from any single assuming insurer or group of affiliated assuming insurers are likely to exceed such limit. Any such notice shall demonstrate that the exposure is safely managed by the domestic ceding insurer.

(2) A ceding insurer shall manage its reinsurance program to ensure diversification. A domestic ceding insurer shall notify the commissioner not later than thirty days after (A) it has ceded to any single assuming insurer or group of affiliated assuming insurers more than twenty per cent of the domestic ceding insurer’s gross written premiums in the prior calendar year, or (B) the domestic ceding insurer determines that the reinsurance ceded to any single assuming insurer or group of affiliated assuming insurers is likely to exceed such limit. Any such notice shall demonstrate that the exposure is safely managed by the domestic ceding insurer.