Subject to Subsection (2), a credit for reinsurance ceded under Section 31A-17-404 or 31A-17-404.1 is not allowed unless, in addition to meeting the requirements of Section 31A-17-404 or 31A-17-404.1, the reinsurance agreement provides in substance that if the ceding insurer is insolvent, the reinsurance is payable by the assuming insurer:
Terms Used In Utah Code 31A-22-1201
Contract: A legal written agreement that becomes binding when signed.
insolvent: means that:
(a)
an insurer is unable to pay the insurer's obligations as the obligations are due;
(b)
an insurer's total adjusted capital is less than the insurer's mandatory control level RBC under Subsection 31A-17-601(8)(c); or
(c)
an insurer's admitted assets are less than the insurer's liabilities. See Utah Code 31A-1-301
Insurance: includes :
(i)
a risk distributing arrangement providing for compensation or replacement for damages or loss through the provision of a service or a benefit in kind;
(ii)
a contract of guaranty or suretyship entered into by the guarantor or surety as a business and not as merely incidental to a business transaction; and
(iii)
a plan in which the risk does not rest upon the person who makes an arrangement, but with a class of persons who have agreed to share the risk. See Utah Code 31A-1-301
Reinsurance: means an insurance transaction where an insurer, for consideration, transfers any portion of the risk it has assumed to another insurer. See Utah Code 31A-1-301
(a)
on the basis of the liability of the ceding insurer under the contract or contracts reinsured;
(b)
without diminution because of the insolvency of the ceding insurer; and
(c)
directly to the ceding insurer or to its domiciliary liquidator or receiver.
(2)
Subsection (1) applies except if:
(a)
a contract specifically provides another payee of the insurance in the event of the insolvency of the ceding insurer; or
(b)
the assuming insurer, with the consent of the one or more direct insureds, assumes the policy obligations of the ceding insurer:
(i)
as direct obligations of the assuming insurer to the payees under the policies; and
(ii)
in substitution for the obligations of the ceding insurer to the payees.
