Sec. 31.05.08.18. Trust Agreement Established in Conjunction with Reinsurance Contracts Covering Life, Annuities, or Accident and Health Risks

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 life, annuities, or accident and health risks, where it is customary 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 the assuming insurer's share under the:

(1) Reinsurance contract of premiums returned, but not yet recovered from the assuming insurer, to the owners of policies reinsured under the insurance contract on account of cancellations of the policies; and

(2) Specific reinsurance contract of surrenders and benefits or losses paid by the ceding insurer, but not yet recovered from the assuming insurer, under the terms and provisions of the policies reinsured under the reinsurance contract.

C. Payment to Assuming Insurer. A trust agreement may allow the ceding insurer to use amounts drawn on the trust account to pay to the assuming insurer amounts held in the trust account in excess of the amount necessary to secure the credit or reduction from liability for reinsurance taken by the ceding insurer.

D. On Termination of Trust Account.

(1) A trust agreement may allow the ceding insurer to withdraw amounts equal to the assuming insurer's share of liabilities, to the extent that the liabilities have not yet been funded by the assuming insurer, and deposit those amounts in a separate account in accordance with §D(2) of this regulation in trust for the uses and purposes 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 specific 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(2) Amounts withdrawn from the trust account and deposited under §D(1) of this regulation shall be deposited: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 §§A and B of this regulation as may remain executory after the withdrawal and for any period after the termination date.