§ 38.2-1316.6. Purpose, calculation and effect of reinsurance credits
A. For the purpose of determining the financial condition of a ceding insurer, the ceding insurer shall receive credit for any reinsurance for which credit is allowed under this article, calculated as follows:
1. For reinsurance of the whole or any part of any risk other than those risks specified in subdivision 2 of this subsection, the ceding insurer shall receive credit for the reinsurance by way of deduction from its:
a. Unearned premium liability specified in §§ 38.2-1312 and 38.2-1315 or § 38.2-4610.1, as the case may be; and
b. Loss and expense reserve liability specified in § 38.2-1314 or § 38.2-4609, as the case may be, except in the case of reinsurance covering a loss paid by the ceding insurer for which payment is owed but has not been made by the assuming insurer, the ceding insurer shall receive credit as an admitted asset for the amount owed by the assuming insurer until the payment is made. Reinsurance ceded to an assuming insurer may be deducted on the basis of the original premiums and original terms except that excess loss or catastrophe reinsurance may be deducted only on the basis of actual reinsurance premiums and actual reinsurance terms.
2. For reinsurance of the whole or any part of any life insurance, annuity or accident and sickness insurance risk, the ceding insurer shall receive credit by way of deduction from its reserve liability, specified in § 38.2-1311. The credit shall not exceed the amount which the ceding insurer would have reserved on the reinsured portion of the risk if there had been no reinsurance.
B. For the purpose of determining the financial condition of any reinsurer, the reinsurer shall establish a reserve liability at least equal to the amount that it would be required to maintain in accordance with this title if it were the direct insurer of the assumed risks as specified in the reinsurance agreement. The reinsurer shall establish unearned premium liability equal to the amount of the deduction specified in subdivision 1 of subsection A of this section.
C. The Commission shall disallow any credit for any reinsurance found by it to have been arranged for the purpose principally of deception or financial statement distortion as to any insurer's financial condition as of the date of any financial statement of the insurer. Without limiting the general purport of this provision, reinsurance of any substantial part of the ceding insurer's outstanding risks contracted for in fact within four months prior to the date of any such financial statement and canceled in fact within four months after the date of such statement, or reinsurance under which the assuming insurer bears no substantial insurance risk of net loss to itself, shall prima facie be deemed to have been arranged for the purpose principally of deception or financial statement distortion within the intent of this provision.
(1991, c. 264.)
Sections: Previous 38.2-1315.1 38.2-1316 38.2-1316.1 38.2-1316.2 38.2-1316.3 38.2-1316.4 38.2-1316.5 38.2-1316.6 38.2-1316.7 38.2-1316.8 38.2-1317 38.2-1317.1 38.2-1317.2 38.2-1318 38.2-1319 NextLast modified: April 16, 2009