(a) An SPFC may reinsure only the risks of a ceding insurer pursuant to a reinsurance contract. No SPFC shall issue a contract of insurance or a contract for assumption of risk or indemnification of loss other than such reinsurance contract.

(b) Unless otherwise approved in advance by the Commissioner, no SPFC shall assume or retain exposure to insurance or reinsurance losses for its own account that are not funded by:

(1) Proceeds from an insurance securitization, letters of credit, or other assets described in N.C. Gen. Stat. § 58-10-340(22).

Terms Used In North Carolina General Statutes 58-10-605

  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • Contract: A legal written agreement that becomes binding when signed.
  • Fiduciary: A trustee, executor, or administrator.
  • following: when used by way of reference to any section of a statute, shall be construed to mean the section next preceding or next following that in which such reference is made; unless when some other section is expressly designated in such reference. See North Carolina General Statutes 12-3
  • Fraud: Intentional deception resulting in injury to another.
  • Indemnification: In general, a collateral contract or assurance under which one person agrees to secure another person against either anticipated financial losses or potential adverse legal consequences. Source: FDIC
  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
  • state: when applied to the different parts of the United States, shall be construed to extend to and include the District of Columbia and the several territories, so called; and the words "United States" shall be construed to include the said district and territories and all dependencies. See North Carolina General Statutes 12-3

(2) Premium and other amounts payable by the ceding insurer to the SPFC pursuant to the reinsurance contract.

(3) Any return on investment of the items described in subdivisions (1) and (2) of this subsection.

(c) The reinsurance contract shall contain all provisions required or approved by the Commissioner, which requirements shall take into account the laws applicable to the ceding insurer regarding the ceding insurer taking credit for the reinsurance provided under such reinsurance contract.

(d) An SPFC may cede risks assumed through a reinsurance contract to one or more reinsurers through the purchase of reinsurance, subject to the prior approval of the Commissioner.

(e) An SPFC may enter into contracts and conduct other commercial activities related or incidental to and necessary to fulfill the purposes of the reinsurance contract, the insurance securitization, and this Part, provided such contracts and activities are included in the SPFC’s plan of operation or are otherwise approved in advance by the Commissioner. Such contracts and activities may include the following:

(1) Entering into SPFC contracts.

(2) Issuing SPFC securities in accordance with applicable securities law.

(3) Complying with the terms of such contracts or securities.

(4) Entering into trust, guaranteed investment contract, letter of credit, swap, tax, administration, reimbursement, or fiscal agent transactions.

(5) Complying with trust indenture, reinsurance, or retrocession and other agreements necessary or incidental to effectuate an insurance securitization in compliance with this Part or the plan of operation approved by the Commissioner.

(f) Unless otherwise approved in advance by the Commissioner, a reinsurance contract shall not contain any provision for payment by the SPFC in discharge of its obligations under the reinsurance contract to any person other than the ceding insurer or any receiver of the ceding insurer.

(g) An SPFC shall notify the Commissioner immediately of any action by a ceding insurer or any other person to foreclose on or otherwise take possession of collateral provided by the SPFC to secure any obligation of the SPFC.

(h) In the SPFC insurance securitization, the contracts or other relating documentation shall contain provisions identifying the SPFC.

(i) Unless otherwise approved by the Commissioner, no SPFC shall enter into an SPFC contract with a person that is not licensed or otherwise authorized to transact the business of insurance or reinsurance in at least its state or country of domicile.

(j) No SPFC shall:

(1) Have any direct obligation to the policyholders or reinsureds of the counterparty.

(2) Perform any of the following activities with anyone convicted of a felony, anyone who is untrustworthy or of known bad character, or anyone convicted of a criminal offense involving the conversion or misappropriation of fiduciary funds or insurance accounts, theft, deceit, fraud, misrepresentation, or corruption:

a. Lend or otherwise invest assets.

b. Place any assets in custody, trust, or under management.

c. Borrow money or receive a loan or advance, other than by issuance of the securities pursuant to an insurance securitization. (2013-116, s. 1.)

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