(a) Credit for ceded insurance. Pursuant to Insurance Code §493.102(a)(3), a ceding insurer may be allowed credit for insurance risk of loss ceded to an assuming insurer that maintains a trust fund in a qualified United States financial institution for the payment of the valid claims of its United States policyholders and ceding insurers, their assigns, and successors in interest. Initially on establishing the trust and not later than March 1 of each subsequent year the assuming insurer must report to TDI information substantially the same as that required to be reported on the NAIC annual statement form by authorized insurers to enable TDI to determine the sufficiency of the trust fund, and the following information:
  (1) the assuming insurer's:
    (A) full name;
    (B) physical address for its principal place of business;
    (C) mailing address;
    (D) NAIC number, United States federal tax identification number, and International Securities Identification Number, as applicable; and
    (E) contact individual's name, phone number, and email; and
  (2) the trustee report required under Insurance Code §493.155(a) and subsection (c)(5) of this section.
(b) Three types of trusteed assuming insurers.
  (1) A single assuming insurer must have a trust fund consisting of a trusteed account representing the assuming insurer's liabilities attributable to business written in the United States and, in addition, include a trusteed surplus of not less than $20 million, except as provided in Insurance Code §493.152(a)(2) and (a-1).
  (2) A group of individual unincorporated underwriters must have a trust fund consisting of a trusteed account representing the group's liabilities attributable to business written in the United States and, include a trusteed surplus of not less than $100 million. The group must make available to TDI an annual certification by the group's domiciliary regulator and its independent public accountants of the solvency of each underwriter.
  (3) A group of incorporated insurers under common administration which has continuously transacted an insurance business for at least three years, which is under the supervision of the Department of Trade and Industry of the United Kingdom, and which has aggregate policyholders' surplus of $10 billion, must consist of a trusteed account representing the group's several liabilities attributable to business written in the United States pursuant to reinsurance agreements issued in the name of the group and include a trusteed surplus of not less than $100 million that must be held jointly for the benefit of United States insurers ceding business to any member of the group. Each member of the group must make available to TDI an annual certification by the member's domiciliary regulator and its independent public accountants of the solvency of each member.
(c) Form of trust. Each trust must be established in a form approved by TDI or the chief insurance regulatory official of another state who, under the trust agreement has principal oversight over the trust. A copy of the trust and any amendments to the trust must be submitted to TDI and the chief insurance regulatory official of each state in which the ceding insurer beneficiaries of the trust are domiciled. If the Commissioner has principal regulatory oversight over the trust, the form of the trust must provide as follows:
  (1) Contested claims are valid and enforceable out of funds in trust to the extent remaining unsatisfied 30 days after entry of the final order of any court of competent jurisdiction in the United States.
  (2) Legal title to the assets of the trust must be vested in the trustees for the benefit of the grantor's United States policyholders and ceding insurers, their assigns, and successors in interest.
  (3) The trust and the assuming insurer are subject to examination as determined by TDI.
  (4) The trust must remain in effect for as long as the assuming insurer has outstanding obligations due under the reinsurance agreements subject to the trust.
  (5) Not later than February 28 of each year, the trustees of the trust must report to TDI in writing and set forth the balance of the trust, list the trust's investments at the preceding year end, certify the date of termination of the trust, if so planned, or certify that the trust will not expire prior to the next following December 31.
  (6) The grantor of the trust must notify TDI of any amendment to the trust within 10 business days of adoption of the amendment. If the Commissioner determines subsequent to receipt of this notice that the amendment is not acceptable and the amendment is not brought into compliance with Insurance Code and TDI rules, the trusteed status of the assuming insurer will be automatically revoked. TDI will provide notice by certified mail to the most recent address of the trusteed assuming insurer according to TDI records. The trusteed assuming insurer may request a public hearing to show compliance and seek reinstatement within 20 days of notification.

Source Note: The provisions of this §7.607 adopted to be effective August 16, 1990, 15 TexReg 4435; amended to be effective September 30, 1993, 18 TexReg 6329; amended to be effective June 19, 2018, 43 TexReg 3888