§ 27.4. Disclosure of material nonrenewals, cancellations or revisions of ceded reinsurance agreements.
(a) A property and casualty insurer shall file:
(1) A statement disclosing a nonrenewal, cancellation or revision of a ceded reinsurance agreement with respect to property and casualty business—including accident and health business written by a property and casualty insurer—if it relates to reinsurance cessions which generate any of the following.
(i) Fifty percent or more of the insurer’s ceded written premiums as reported in the most recent annual statutory financial statement filed by the insurer.
(ii) Fifty percent or more of the insurer’s total ceded indemnity loss and loss adjustment expense reserves.
(2) A statement disclosing a revision of a ceded reinsurance agreement with respect to property and casualty business—including accident and health business written by a property and casualty insurer—if any of the following events occur:
(i) A reinsurer which represents more than 10% of a total cession and which is licensed to transact business in this Commonwealth or included on the Department’s list of qualified reinsurers is replaced by one or more reinsurers that are neither licensed nor on the Department’s list of qualified reinsurers.
(ii) Previously established collateral requirements have been reduced or waived for one or more reinsurers that are neither licensed nor on the Department’s list of qualified reinsurers, representing collectively more than 10% of a total cession.
(iii) The percentage increase in the net aggregate retention by the domestic ceding insurer is equal to or greater than 50%.
(b) A property and casualty insurer is not required to file a statement under subsection (a) if any of the following conditions are met:
(1) The total ceded written premium of a property and casualty insurer represents, on an annualized basis, less than 10% of the sum of the insurer’s total written premium, for direct and assumed business as reported in the insurer’s most recent annual statutory financial statement filed with the Department.
(2) A ceded reinsurance agreement which is nonrenewed or canceled is replaced under the following conditions: The replacement reinsurer is licensed or on the Department’s list of qualified reinsurers and the percentage increase in the net aggregate retention by the domestic ceding insurer is less than 50%.
(3) A revision to a ceded reinsurance agreement does not increase the ceding insurer’s retention of risk or exposure to loss.
(4) A revision is made to an inter-company pooling reinsurance agreement among affiliated insurers.
(c) A life insurer shall file:
(1) A statement disclosing a nonrenewal, cancellation or revision of a ceded reinsurance agreement with respect to life, annuity and accident and health business if the transaction affects more than 50% of the total reserve credit taken for business ceded as reported in the insurer’s most recent annual statutory financial statement filed with the Department.
(2) A statement disclosing a revision of a ceded reinsurance agreement with respect to life, annuity and accident and health business if any of the following events occur:
(i) A reinsurer that represents more than 10% of a total cession and that is either licensed or included on the Department’s list of qualified reinsurers is replaced by any reinsurers that are neither licensed nor on the Department’s list of qualified reinsurers.
(ii) Previously established collateral requirements have been reduced or waived with regard to any reinsurers that are neither licensed nor on the Department’s list of qualified reinsurers, representing collectively more than 10% of a total cession.
(d) A life insurer is not required to file a statement under subsection (c) if any of the following conditions are met:
(1) The total reserve credit taken for business ceded represents less than 10% of the amount of gross reserves reported in the insurer’s most recent annual statutory financial statement filed with the Department.
(2) A ceded reinsurance agreement that is nonrenewed or canceled is replaced under the following conditions: The replacement reinsurer is either licensed or on the Department’s list of qualified reinsurers and the percentage increase in the amount of reserve credit taken by the domestic ceding insurer under the replacement agreement does not exceed 50% of the reserve credit which was taken under the agreement being replaced.
(3) A revision to a ceded reinsurance agreement does not increase the ceding insurer’s retention of risk or exposure to loss.
(4) A revision is made to an intercompany pooling reinsurance agreement among affiliated insurers.
(e) Statements of material nonrenewal, cancellation or revision of ceded reinsurance agreements as required under this section shall include the following information:
(1) The effective date of the nonrenewal, cancellation or revision.
(2) A description of the transaction.
(3) Identification of the party which initiated the transaction.
(4) The purpose of or reason for the transaction.
(5) The identity of replacement reinsurers, if applicable.
(6) Quantification of additional risk to the insurer resulting from the transaction.
(7) The name, title, address and telephone number of the individual to whom notices and correspondence concerning the statements should be addressed.
(8) A certification of an officer of the insurer as provided in Appendix A (relating to certification for statement disclosing material transaction).
(f) Statements disclosing material nonrenewals, cancellations or revisions of ceded reinsurance agreements as required under this section shall be prepared on a nonconsolidated basis; except that statements may be prepared on a consolidated basis if the insurer meets the following requirements:
(1) The insurer is part of a consolidated group of insurers which utilizes a pooling arrangement or 100% reinsurance agreement which affects the solvency and integrity of the reporting insurer’s reserves.
(2) The insurer ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than $1 million total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than 5% of the insurer’s capital and surplus as reported in its most recent annual statutory financial statement filed with the Department.
(g) An insurer shall file a statement disclosing a material nonrenewal, cancellation or revision of a ceded reinsurance agreement as required under this section with the Department within 30 days after the date on which the transaction was closed.
(h) A filing is not required under this section if statements disclosing material nonrenewals, cancellations or revisions of ceded reinsurance agreements have been submitted to the Department under other laws, regulations or requirements.
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