(a) Except as provided under Insurance Code §493.002(a-1) for certain county mutual insurance companies operating under Insurance Code §912.056, an insurer may take credit for reinsurance ceded to an assuming insurer that has been certified as an assuming insurer in this state pursuant to Insurance Code §493.1033 and this subchapter. The assuming insurer must be certified at all times for which statutory financial statement credit for reinsurance is claimed by the ceding insurer.
(b) The credit allowed will be based on the security held by or on behalf of the ceding insurer in accordance with a rating assigned to the certified assuming insurer by the Commissioner. The security must be in a form consistent with the provisions of Insurance Code §493.1033(a)(2) and §493.1036(d) and this subchapter.
(c) The amount of security required in order for full credit to be allowed must correspond with the following requirements:
  (1) The minimum reduced amounts of security that must be withheld for full credit are stated in Figure: 28 TAC §7.621(c)(1):
Attached Graphic
  (2) Affiliated reinsurance agreements are eligible for the same reduced security requirements as non-affiliated reinsurance agreements.
  (3) A certified assuming insurer may defer posting security for catastrophe recoverables for a period up to one year from the date of the first instance of a liability reserve entry by the ceding company as a result of a loss from a catastrophic occurrence that is recognized by the Commissioner. The one-year deferral period is contingent on the certified assuming insurer continuing to pay claims in a timely manner. Deferral of posting collateral for reinsurance recoverables related to a catastrophic occurrence under this subsection are permitted for only the following lines of business as reported on the NAIC annual financial statement:
    (A) Line 1: Fire;
    (B) Line 2: Allied lines;
    (C) Line 3: Farmowners multiple peril;
    (D) Line 4: Homeowners multiple peril;
    (E) Line 5: Commercial multiple peril;
    (F) Line 9: Inland marine;
    (G) Line 12: Earthquake; and
    (H) Line 21: Auto physical damage.
  (4) A ceding insurer may take credit for reinsurance under this section only with respect to a reinsurance agreement entered into or renewed on or after the effective date that the assuming insurer is certified under this subchapter. Any reinsurance agreement entered into prior to the effective date of the assuming insurer's certification that is subsequently amended after the effective date of the certification of the assuming insurer, or a new reinsurance agreement, covering any risk for which collateral was provided previously, will only be subject to this section with respect to losses incurred and reserves reported from and after the effective date of the amendment or new agreement.
  (5) Nothing in this section prohibits the parties to a reinsurance agreement from agreeing to provisions establishing security requirements that exceed the minimum security requirements established for certified assuming insurers under this section.

Source Note: The provisions of this §7.621 adopted to be effective June 19, 2018, 43 TexReg 3888