N.Y. Insurance Law § 6906: Reinsurance

§ 6906. Reinsurance. (a) For financial guaranty insurance that takes

effect on or after the effective date of this article, an insurer

authorized to transact financial guaranty insurance shall receive credit

for reinsurance, in accordance with the provisions of this chapter

applicable to property/casualty insurers, as an asset or as a reduction

from liabilities provided that such reinsurance is subject to an

agreement that, for its stated term and with respect to any such

reinsured financial guaranty insurance in force, the reinsurance

agreement (facultative or treaty) may only be terminated or amended (i)

at the option of the reinsurer or the ceding insurer, if the reinsurance

agreement provides that the liability of the reinsurer with respect to

policies in effect at the date of termination shall continue until the

expiration or cancellation of each such policy, or (ii) with the consent

of the ceding company, if the reinsurance agreement provides for a

cutoff of the reinsurance in force at the date of termination, or (iii)

at the discretion of the superintendent acting as rehabilitator,

liquidator or receiver of the ceding or assuming insurer; and provided

that such reinsurance is:

(1) placed with a financial guaranty insurance corporation licensed

under this article or an insurer writing only financial guaranty

insurance as is or would be permitted by this article; or

(2) placed with a property/casualty insurer or an accredited reinsurer

licensed or accredited to reinsure risks of every kind or description

(including municipal obligation bonds), as set forth in subsection (c)

of section four thousand one hundred two of this chapter, if the

reinsurance agreement with such insurer requires that such insurer:

(A) have and maintain surplus to policyholders of at least thirty-five

million dollars;

(B) establish and maintain the reserves required in section six

thousand nine hundred three of this article, except that if the

reinsurance agreement is not pro rata the contribution to the

contingency reserve shall be equal to fifty percent of the quarterly

earned reinsurance premium. However, the assuming insurer need not

establish and maintain such reserve to the extent that the ceding

insurer has established and continues to maintain such reserve;

(C) comply with the provisions of subsection (c) of section six

thousand nine hundred four of this article, except that the maximum

total exposures reinsured net of retrocessions and collateral shall be

one-half of that permitted for a financial guaranty insurance

corporation;

(D) if a parent of the insurer, another subsidiary of the parent of

the insurer, or a subsidiary of the insurer, then the aggregate of all

risks assumed by such reinsurers shall not exceed ten percent of the

insurer's exposures, net of retrocessions and collateral. Direct or

indirect ownership interests of fifty percent or more shall be deemed a

parent/subsidiary relationship;

(E) if an affiliate of the insurer, such affiliate shall not assume a

percentage of the insurer's total exposures insured net of retrocessions

and collateral in excess of its percentage of equity interest in the

insurer; and

(F) assumes from the financial guaranty insurer and any affiliate,

parent of the insurer, another subsidiary of the parent of the insurer,

or subsidiary of the insurer that is a financial guaranty insurance

corporation or an insurer writing only financial guaranty insurance as

is or would be permitted by this article and such other kinds of

insurance that a financial guaranty insurance corporation may write in

this state, together with all other reinsurers subject to this

paragraph, less than fifty percent of the total exposures insured by the

financial guaranty insurer and such affiliates, parents or subsidiaries

of the insurer, net of collateral, remaining after deducting any

reinsurance placed with another financial guaranty insurance corporation

that is not an affiliate, a parent of the financial guaranty insurer,

another subsidiary of the parent of the insurer, or a subsidiary of the

insurer or a financial guaranty insurer writing only financial guaranty

insurance as is or would be permitted by this article that is not an

affiliate, a parent of the financial guaranty insurer, another

subsidiary of the parent of the insurer, or a subsidiary of the insurer;

or

(3) if placed with an unauthorized or unaccredited reinsurer which

otherwise meets the requirements of either the opening paragraph of this

subsection and paragraph one of this subsection, or the opening

paragraph of this subsection and subparagraphs (A), (D), (E) and (F) of

paragraph two of this subsection, in an amount not exceeding the

liabilities carried by the ceding insurer for amounts withheld under a

reinsurance treaty with such reinsurer or amounts deposited by such

reinsurer as security for the payment of obligations under the treaty if

such funds or deposit are held subject to withdrawal by, and under the

control of, the ceding insurer.

(b) In determining whether the insurer meets the aggregate risk

limitations, in addition to credit for other types of qualifying

reinsurance, the insurer's aggregate risk may be reduced to the extent

of the limit for aggregate excess reinsurance, but in no event in an

amount greater than the amount of the aggregate risks which will become

due during the unexpired term of such reinsurance agreement in excess of

the insurer's retention pursuant to such reinsurance agreement.