N.Y. Insurance Law § 6507: Reinsurance

§ 6507. Reinsurance. (a) A mortgage insurer may, by contract, reinsure

any insurance it transacts and receive credit for such reinsurance as an

asset or as a reduction from liabilities, including its contingency

reserve liability, in its financial statements where such reinsurance is

placed with another mortgage insurer licensed under this article.

(b) Notwithstanding any provision of law to the contrary, mortgage

guaranty insurance may, by contract, be reinsured, provided that any

reinsurance arrangements entered into by a mortgage insurer and an

assuming insurer comply with the provisions of this article. The

unearned premium reserve required by section one thousand three hundred

five of this chapter, the contingency reserve required by paragraph two

of subsection (a) of section six thousand five hundred two of this

article and loss reserve required by paragraph three of subsection (a)

of section six thousand five hundred two of this article shall be

established and maintained by the mortgage insurer or by the assuming

insurer so that the aggregate reserves shall not be less than the

reserves required by such subsection.

(c) Where a mortgage insurer cedes any insurance to an insurer that

insures or reinsures other lines of insurance in addition to mortgage

guaranty insurance, the amount of insurance so ceded shall not exceed

thirty-five percent of the total exposure insured by the mortgage

insurer after deducting insurance ceded to any other mortgage insurer.

(d) Where a mortgage insurer cedes any insurance to a mortgage insurer

not licensed under this article or an insurer that insures or reinsures

other lines of insurance in addition to mortgage guaranty insurance, in

order for the mortgage insurer to receive credit for such reinsurance as

an asset or as a reduction from liabilities, including its contingency

reserve liability, in its financial statements, such assuming insurer

must maintain a surplus to policyholders of at least thirty-five million

dollars and the following must occur;

(1) the insurer must establish and maintain in a segregated trust an

amount equal to the greater of either the contingency reserve required

by paragraph two of subsection (a) of section six thousand five hundred

two of this article, or four percent of the outstanding total liability

under the aggregate insurance policies assumed from the mortgage

insurer;

(2) the insurer must establish and maintain in a segregated trust, or

provide a letter of credit in a form approved by the superintendent, an

amount equal to the unearned premium and loss reserves;

(3) any such aggregated trust shall be funded by assets permitted by

article fourteen of this chapter for the loss reserve required by

paragraph three of subsection (a) of section six thousand five hundred

two of this article and for the unearned premium reserve required by

section one thousand three hundred five of this chapter, and shall be

funded by either the types of assets specified in paragraphs one, two

and three of subsection (b) of section one thousand four hundred two and

paragraphs one, two and twelve of subsection (a) of section one thousand

four hundred four of this chapter or by tax and loss bonds purchased

pursuant to § 832(e) of the Internal Revenue Code for the greater of the

amount of reserves required by paragraph two of subsection (a) of

section six thousand five hundred two of this article or paragraph one

of subsection (b) of section six thousand five hundred two of this

article;

(4) the reinsurance agreement must be submitted to the commissioner or

superintendent of insurance of the mortgage insurer's domicile for

approval; and

(5) the reinsurance agreement must provide that:

(A) it is not valid until approved by the commissioner or

superintendent of insurance of the mortgage insurer's domicile;

(B) any amendments to the reinsurance agreement must be submitted to

the commissioner or superintendent of insurance of the mortgage

insurer's domicile for approval prior to becoming effective;

(C) the ceding mortgage insurer has a right to terminate the ceding of

additional insurance under the reinsurance agreement if so ordered by

the superintendent;

(D) the superintendent has the right to request from the assuming

reinsurer information concerning its financial condition;

(E) the assuming reinsurer shall notify the superintendent of any

material change in its financial condition; and

(F) such agreements and any amendments thereto shall be provided to

the superintendent, who shall have the right to disapprove of any

agreement. Such agreements and any amendments thereto shall be deemed

approved by the superintendent unless disapproved within thirty days

from the date provided to the superintendent. If the superintendent

disapproves of any reinsurance agreement or amendments thereto the

mortgage insurer shall not receive credit for such reinsurance as an

asset or as a reduction from liabilities in its financial statement.

(e) Nothing contained herein shall be deemed to permit an insurer that

insures or reinsures other lines of insurance in addition to mortgage

guaranty insurance to write directly mortgage guaranty insurance.

(f) Any reinsurance agreement that was valid under this chapter at the

time entered into shall not be invalidated by this section.