§ 162.1. Purpose.
(a) This chapter sets forth the conditions whereby a ceding insurer will not be permitted to receive credit for reinsurance in financial statements filed with the Department if the reinsurance agreement does not transfer all of the significant risks inherent in the business being reinsured or, in substance or effect, the expected potential liability to the ceding insurer remains basically unchanged by the reinsurance transaction, notwithstanding certain risk elements in the reinsurance agreement, such as catastrophic mortality or extraordinary survival.
(b) In addition to specifying the conditions which would result in denial of credit, this chapter requires reinsurance agreements which fall within the scope of § § 162.3 and 162.5 (relating to scope; and agreements to be filed with Commissioner), including data detailing the financial impact of the agreements, to be filed by the ceding insurer with the Department and specifies the accounting methodology to be followed by the ceding insurer in reporting any increase in surplus resulting from those agreements in financial statements filed with the Department.
(c) This chapter also provides safeguards to insure that agreements for which credit has been taken are actually executed and effective within a time period that reasonably corresponds to the date of the insurer’s financial statements.
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