Sec. 31.05.08.17. Trust Agreement Established in Conjunction with Reinsurance Contracts Covering Risks Other than Life, Annuities, and Accident and Health

A. Use of Amounts Drawn on Trust Account. Notwithstanding any provision of Regulation .15 of this chapter, when a trust agreement is established to meet the requirements of Regulation .14 of this chapter in conjunction with a reinsurance contract covering risks other than life, annuities, or accident and health, where it is customary practice to provide a trust agreement for a specific purpose, the trust agreement may allow the ceding insurer to use amounts drawn on the trust account, without diminution because of the insolvency of the ceding insurer or the assuming insurer, for the purposes listed in this regulation.

B. To Pay or Reimburse Ceding Insurer. A trust agreement may allow the ceding insurer to use amounts drawn on the trust account to pay or reimburse the ceding insurer for:

(1) The assuming insurer's share under the specific reinsurance contract regarding any losses and loss adjustment expenses paid by the ceding insurer but not recovered from the assuming insurer; and

(2) Unearned premiums due to the ceding insurer if not otherwise paid by the assuming insurer.

C. Payment to Assuming Insurer. A trust agreement may allow the ceding insurer to use amounts drawn on the trust account to make payment to the assuming insurer of any amounts held in the trust account that exceed 102 percent of the actual amount required to fund the assuming insurer's obligations under the specific reinsurance contract.

D. On Termination of Trust Account.

(1) A trust agreement may allow the ceding insurer to withdraw amounts equal to the assuming insurer's entire obligations under the reinsurance contract and deposit those amounts in a separate account in accordance with §D(2) of this regulation in trust for the uses specified in §§B and C of this regulation if the:

(a) Ceding insurer has received notification of termination of the trust account; and

(b) Assuming insurer's entire obligations under the reinsurance contract remain unliquidated and undischarged 10 days before the termination date.

(2) Amounts withdrawn from the trust account and deposited under §D(1) of this regulation shall be deposited:

(a) In a separate account, in the name of the ceding insurer, in a qualified U.S. financial institution, apart from the general assets of the ceding insurer; and

(b) In trust for the uses specified in §§B and C of this regulation as may remain executory after the withdrawal and for any period after the termination date.