NAC681A.310. Establishment of trust agreement in conjunction with reinsurance agreement: Acceptable use of trust account by ceding insurer under certain circumstances; contents of reinsurance agreement.

     1. If a trust agreement is established in conjunction with a reinsurance agreement covering risks other than life, annuities or accident and health, and it is customary practice to provide a trust agreement for a specific purpose, such a trust agreement may, notwithstanding the provisions of NAC 681A.250 to 681A.380, inclusive, to the contrary, provide that the ceding insurer shall use and apply amounts drawn upon the trust account, without diminution because of the insolvency of the ceding insurer or the assuming insurer, for the following purposes:

     (a) To pay or reimburse the ceding insurer for the assuming insurer’s share under the specific reinsurance agreement for:

          (1) Any losses and allocated loss expenses paid by the ceding insurer but not recovered from the assuming insurer; or

          (2) Any unearned premiums due to the ceding insurer if not otherwise paid by the assuming insurer;

     (b) To pay to the assuming insurer 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 agreement; or

     (c) If the ceding insurer has received notification of termination of the trust account and the assuming insurer’s entire obligations under the reinsurance agreement remain unliquidated and undischarged 10 days before the termination date, to withdraw an amount equal to those obligations and deposit the amount in a qualified financial institution in the United States in a separate account in the name of the ceding insurer, apart from its general assets, in trust for such uses and purposes specified in paragraphs (a) and (b) as remain executory after the withdrawal and for any period after the termination date.

     2. The reinsurance agreement entered into in conjunction with the trust agreement may contain the provisions set forth in NAC 681A.325 if the requirements of this section are included in the trust agreement.

     (Added to NAC by Comm’r of Insurance, eff. 6-28-96; A by R027-02, 5-31-2002)