§ 6048i - Permitted reinsurance - Vermont Statutes

§ 6048i. Permitted reinsurance

(a) A special purpose financial captive insurance company may reinsure only the risks of a ceding insurer, pursuant to a reinsurance contract. A special purpose financial captive insurance company may not issue a contract of insurance or a contract for assumption of risk or indemnification of loss other than such reinsurance contract.

(b) Unless otherwise approved in advance by the commissioner, a special purpose financial captive insurance company may not assume or retain exposure to insurance or reinsurance losses for its own account that are not funded by:

(1) Proceeds from a special purpose financial captive insurance company securitization or letters of credit or other assets described in subdivision 6048c(3) of this chapter;

(2) Premium and other amounts payable by the ceding insurer to the special purpose financial captive insurance company pursuant to the reinsurance contract; and

(3) Any return on investment of the items in subdivisions (1) and (2) of this subsection.

(c) The reinsurance contract shall contain all provisions reasonably required or approved by the commissioner, which requirements shall take into account the laws applicable to the ceding insurer regarding the ceding insurer taking credit for the reinsurance provided under such reinsurance contract.

(d) A special purpose financial captive insurance company may cede risks assumed through a reinsurance contract to one or more reinsurers through the purchase of reinsurance, subject to the prior approval of the commissioner.

(e) A special purpose financial captive insurance company may enter into contracts and conduct other commercial activities related or incidental to and necessary to fulfill the purposes of the reinsurance contract, the insurance securitization, and this subchapter, provided such contracts and activities are included in the special purpose financial captive insurance company's plan of operation or are otherwise approved in advance by the commissioner. Such contracts and activities may include but are not limited to: entering into reinsurance contracts; issuing special purpose financial captive insurance company securities; complying with the terms of these contracts or securities; entering into trust, guaranteed investment contract, swap, or other derivative, tax, administration, reimbursement, or fiscal agent transactions; or complying with trust indenture, reinsurance, or retrocession; and other agreements necessary or incidental to effect an insurance securitization in compliance with this subchapter and the special purpose financial captive insurance company's plan of operation.

(f) Unless otherwise approved in advance by the commissioner, a reinsurance contract shall not contain any provision for payment by the special purpose financial captive insurance company in discharge of its obligations under the reinsurance contract to any person other than the ceding insurer or any receiver of the ceding insurer.

(g) A special purpose financial captive insurance company shall notify the commissioner immediately of any action by a ceding insurer or any other person to foreclose on or otherwise take possession of collateral provided by the special purpose financial captive insurance company to secure any obligation of the special purpose financial captive insurance company. (Added 2007, No. 49, § 17.)