1.  As used in this section, ‘coverage date’ means the date on which the Association becomes liable for the obligations of a member insurer.

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2.  At any time after the coverage date, the Association may elect to succeed to the rights and obligations of the member insurer which accrue on or after the coverage date and relate to policies or contracts covered, in whole or in part, by the Association under any one or more agreements for indemnity reinsurance entered into by the member insurer as ceding insurer and selected by the Association. However, the Association may not exercise its right of election with respect to an agreement for reinsurance if the receiver, rehabilitator or liquidator of the member insurer has previously expressly disaffirmed the agreement. The election must be effected by a notice to the receiver, rehabilitator or liquidator and the affected reinsurers. If the Association makes such an election:

(a) The Association is responsible for all unpaid premiums due under each agreement for periods both before and after the coverage date, and for the performance of all other obligations to be performed after the coverage date, in each case which relates to a policy or contract covered in whole or in part by the Association. The Association may charge a policy or contract covered in part by it, through reasonable methods of allocation, for the costs of reinsurance in excess of the obligations of the Association.

(b) The Association is entitled to any amount payable by the reinsurer under each agreement with respect to losses or events that occur in periods after the coverage date and relate to policies or contracts covered in whole or in part by the Association, but upon receipt of any such amount, the Association is obligated to pay, to the beneficiary under the policy or contract on account of which the amount was paid, that portion of the amount received by the Association that exceeds the benefits paid by the Association on account of the policy or contract less the retention by the impaired or insolvent insurer applicable to the loss or event.

(c) The Association and each reinsurer shall, within 30 days after the election, calculate the net balance due to or from the Association under each agreement as of the date of the election, giving full credit for all items paid by the member insurer or its receiver, rehabilitator or liquidator, or the reinsurer, between the coverage date and the date of the election. The Association or the reinsurer shall pay the net balance within 5 days after the completion of the calculation. If a receiver, rehabilitator or liquidator has received any amount due the Association pursuant to paragraph (b), the recipient shall remit the amount to the Association as promptly as practicable.

(d) The reinsurer may not terminate an agreement for reinsurance insofar as it relates to policies or contracts covered by the Association in whole or in part, or set off any unpaid premium due for a period before the coverage date against the amount due the Association, if the Association, within 60 days after the election, pays the premiums due for periods both before and after the coverage date which relate to such policies or contracts.

3.  If the Association transfers its obligation to another insurer, and the Association and the other insurer so agree, the other insurer succeeds to the rights and obligations of the Association under subsection 2 effective as of the agreed date, whether or not the Association has made the election described in subsection 2, except that:

(a) An agreement for indemnity reinsurance automatically terminates as to new reinsurance unless the reinsurer and the other insurer agree to the contrary;

(b) The obligation of the Association to the beneficiary under paragraph (b) of subsection 2 ceases on the date of the transfer to the other insurer; and

(c) This subsection does not apply if the Association has previously expressly determined in writing that it will not exercise its right of election under subsection 2.

4.  The provisions of this section supersede an affected agreement for reinsurance which provides for or requires payment of proceeds of reinsurance, on account of a loss or event that occurs after the coverage date, to the receiver, rehabilitator or liquidator of the insolvent insurer. The receiver, rehabilitator or liquidator remains entitled to any amounts payable by the reinsurer under the agreement with respect to losses or events that occur before the coverage date, subject to any applicable setoff.

5.  Except as otherwise expressly provided, this section does not alter or modify the terms or conditions of any agreement of the insolvent insurer for reinsurance, abrogate or limit any right of a reinsurer to rescind an agreement for reinsurance, or give an owner or beneficiary of a policy or contract an independent cause of action against a reinsurer under an agreement for indemnity reinsurance that is not otherwise set forth in the agreement.