Sec. 3. (a) A domestic society may by a reinsurance agreement cede any individual risk or risks in whole or in part to an insurer (other than another fraternal benefit society) having the power to make the reinsurance and authorized to do business in this state or, if not so authorized, one that is approved by the commissioner, but no society may reinsure substantially all of its insurance in force without the written permission of the commissioner. It may take credit for the reserves on the ceded risks to the extent reinsured, but no credit shall be allowed as an admitted asset or as a deduction from liability to a ceding society for reinsurance made, ceded, renewed, or otherwise becoming effective after December 31, 1985, unless the reinsurance is payable by the assuming insurer on the basis of the liability of the ceding society under the contract or contracts reinsured without diminution because of the insolvency of the ceding society.

     (b) Notwithstanding the limitation in subsection (a), a society may reinsure the risks of another society in a consolidation or merger approved by the commissioner under section 4 of this chapter.

As added by P.L.262-1985, SEC.1.