(1) Subject to the provisions of ORS § 731.508 relating to allowance of credit for reinsurance, the Director of the Department of Consumer and Business Services shall allow a reduction from liability for the reinsurance a domestic insurer cedes to a reinsurer that does not meet the requirements of ORS § 731.509 in an amount that does not exceed the liabilities the ceding insurer carries, as provided in this section. The reduction must be in the amount of funds held by or on behalf of the ceding insurer, including funds a reinsurer holds in trust for the ceding insurer as security for payment of obligations under a reinsurance contract with the reinsurer, if the security:

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(a) Is held in the United States subject to withdrawal solely by and under the exclusive control of the ceding insurer; or

(b) In the case of a trust, is held in a qualified United States financial institution. For purposes of this paragraph, a qualified United States financial institution is an institution that:

(A) Is organized, or, in the case of a United States branch or agency office of a foreign banking organization, is licensed, under the laws of the United States or any state and has been granted authority to operate with fiduciary powers; and

(B) Is regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies.

(2) The security for purposes of subsection (1) of this section may be in any of the following forms:

(a) Cash.

(b) Securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners and qualifying as allowed assets.

(c) Clean, irrevocable, unconditional letters of credit, issued or confirmed by a qualified United States financial institution, effective not later than December 31 of the year for which filing is being made, and in the possession of, or in trust for, the ceding company on or before the filing date of the ceding company’s annual statement. Letters of credit issued or confirmed by an institution meeting applicable standards of issuer acceptability as of the dates of issuance or confirmation of the letters of credit are acceptable as security, notwithstanding the subsequent failure of the issuing or confirming institution to meet applicable standards of issuer acceptability, until the letters of credit expire or are extended, renewed, modified or amended, whichever occurs first. For purposes of this paragraph, a qualified United States financial institution is an institution that:

(A) Is organized or, in the case of a United States office of a foreign banking organization, is licensed, under the laws of the United States or any state;

(B) Is regulated, supervised and examined by United States federal or state authorities having regulatory authority over banks and trust companies; and

(C) Has been determined by the director to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the director. For the purpose of making a determination under this subparagraph, the director shall consider and may accept determinations made by the Securities Valuation Office of the National Association of Insurance Commissioners as to whether a financial institution meets the office’s standards of financial conditions and standing.

(d) Any other form of security acceptable to the director.

(3) The director by rule may specify additional requirements for:

(a) Valuing assets or reserve credits;

(b) Setting the amount and forms of security to support reinsurance arrangements; and

(c) The circumstances under which the director will reduce or eliminate credit.

(4) In addition to the authority of the director described in subsection (3) of this section, the director by rule may adopt guidelines, rules, regulations or interpretive letters from the National Association of Insurance Commissioners that apply to reinsurance collateral requirements for alien reinsurers. [1993 c.447 § 66; 2001 c.318 § 16; 2019 c.151 § 22]