<html> <head> <title>Rule 20:06:31:11 Trust agreements qualified under SDCL 58-14-16 -- Additional conditions applicable to reinsurance agreements -- Assets.</title> <META NAME="Keywords" Content="Administrative Rules 20:06:31:11"> <META NAME="Description" Content="Administrative Rules 20:06:31:11 Trust agreements qualified under SDCL 58-14-16 -- Additional conditions applicable to reinsurance agreements -- Assets."> <meta http-equiv=Content-Type content="text/html; charset=windows-1252"> <meta name=Generator content="Microsoft Word 15 (filtered)"> <style> <!-- /* Font Definitions */ @font-face {font-family:"Cambria Math"; panose-1:2 4 5 3 5 4 6 3 2 4;} @font-face {font-family:Times; panose-1:2 2 6 3 5 4 5 2 3 4;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {margin:0in; margin-bottom:.0001pt; font-size:10.0pt; font-family:"Times",serif; color:black;} a:link, span.MsoHyperlink {color:blue; text-decoration:underline;} a:visited, span.MsoHyperlinkFollowed {color:#954F72; 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font-family:"Times New Roman",serif'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1)&nbsp;&nbsp;Require the assuming insurer to enter into a trust agreement, specifying what the agreement is to cover, and to establish a trust account for the benefit of the ceding insurer;</span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;</span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (2)&nbsp;&nbsp;Require the assuming insurer, before depositing assets with the trustee, to execute assignments or endorsements in blank or to transfer legal title to the trustee of all shares, obligations, or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may as necessary negotiate these assets without consent or signature from the assuming insurer or any other entity;</span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;</span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (</span><span style='font-size: 12.0pt;font-family:"Times New Roman",serif'>3</span><span style='font-size: 12.0pt;font-family:"Times New Roman",serif'>)&nbsp;&nbsp;Require that all settlements of account between the ceding insurer and the assuming insurer be made in cash or its equivalent; and</span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;</span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (</span><span style='font-size: 12.0pt;font-family:"Times New Roman",serif'>4</span><span style='font-size: 12.0pt;font-family:"Times New Roman",serif'>)&nbsp;&nbsp;Stipulate that the assuming insurer and the ceding insurer agree that the assets in the trust account, established pursuant to the provisions of the reinsurance agreement, may be withdrawn by the ceding insurer at any time and may be utilized and applied only for the following purposes by the ceding insurer or its successors in interest by operation of law, including any liquidator, rehabilitator, receiver, or conservator of the company, without diminution because of insolvency on the part of the ceding insurer or the assuming insurer</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>, only for the following purposes</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>:</span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;</span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;To</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'> pay or</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'> reimburse the ceding insurer for</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>:</span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;</span></p> <p class=MsoNormal style='margin-left:1.25in;text-align:justify;text-indent: -1.25in'><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)&nbsp;&nbsp;T</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>he assuming insurer's share</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'> under the specific reinsurance agreement</span><span style='font-size:12.0pt; font-family:"Times New Roman",serif'> of premiums returned</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>, but not yet recovered from the assuming insurer,</span><span style='font-size:12.0pt; font-family:"Times New Roman",serif'> to the owners of policies reinsured under the reinsurance agreement because of cancellations of the policies;</span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;</span></p> <p class=MsoNormal style='margin-left:1.25in;text-align:justify;text-indent: -1.25in'><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>ii</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>)&nbsp;&nbsp;The assuming insurer's share of surrenders and the benefits or losses paid by the ceding insurer, pursuant to the provisions of the policies reinsured under the reinsurance agreement;</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'> and</span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;</span></p> <p class=MsoNormal style='margin-left:1.25in;text-align:justify;text-indent: -1.25in'><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>iii</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>)&nbsp;&nbsp;</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>Any other amounts necessary to secure the credit or reduction from liability for reinsurance taken by the ceding insurer; or</span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;</span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>b</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>)&nbsp;&nbsp;To make payment to the assuming insurer of amounts held in the trust account</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'> </span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>in excess of the amount necessary to secure the credit or reduction from liability for</span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'> </span><span style='font-size:12.0pt;font-family:"Times New Roman",serif'>reinsurance taken by the ceding insurer.</span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;</span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Source:</b> 22 SDR 52, effective October 25, 1995; 44 SDR 71, effective October 23, 2017.</span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>General Authority:</b> SDCL <A HREF="/statutes/DisplayStatute.aspx?Type=Statute&Statute=58-14-17">58-14-17.</A></span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Law Implemented:</b> SDCL <A HREF="/statutes/DisplayStatute.aspx?Type=Statute&Statute=58-14-17">58-14-17.</A></span></p> <p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt; font-family:"Times New Roman",serif'>&nbsp;</span></p> </div> </body> </html>