# Title 45 — Insurance, Commissioner of

## Article 45-04 — Life Insurance

## Chapter 45-04-11 — Reinsurance Transactions by Licensed Life Insurers

### § 45-04-11-01. Financial statement prohibitions.

1. No licensed life insurer shall, for reinsurance ceded, reduce any liability or establish any asset
in any financial statement filed with this department if, by the terms of the reinsurance
agreement, in substance or effect, any of the following conditions exist:
a. The primary effect of the reinsurance agreement is to transfer deficiency reserves or
excess interest reserves to the books of the reinsurer for a "risk charge" and the
agreement does not provide for significant participation by the reinsurer in one or more of
the following risks: mortality, morbidity, investment, or surrender benefit;
b. The reserve credit taken by the ceding insurer is in excess of the actuarial reserve
necessary, under the North Dakota insurance law or rules, including actuarial
interpretations or standards adopted by the department, to support the policy obligations
transferred under the reinsurance agreement;
c. The reserve credit taken by the ceding insurer is greater than the underlying reserve of
the ceding company supporting the policy obligations transferred under the reinsurance
agreement;
d. The ceding insurer is required to reimburse the reinsurer for negative experience under
the reinsurance agreement, except that neither offsetting experience refunds against
prior years' losses nor payment by the ceding insurer of an amount equal to prior years'
losses upon voluntary termination of inforce reinsurance by that ceding insurer shall be
considered such a reimbursement to the insurer for negative experience;
e. The ceding insurer can be deprived of surplus at the reinsurer's option or automatically
upon the occurrence of some event, such as the insolvency of the ceding insurer, except
that termination of the reinsurance agreement by the reinsurer for nonpayment of
reinsurance premiums shall not be considered to be such a deprivation of surplus;
f. The ceding insurer must, at specific points in time scheduled in the agreement, terminate
or automatically recapture all or part of the reinsurance ceded;
g. No cash payment is due from the reinsurer, throughout the lifetime of the reinsurance
agreement, with all settlements prior to the termination date of the agreement made only
in a "reinsurance account", and no funds in such account are available for the payment of
claims; or
h. The reinsurance agreement involves the possible payment by the ceding insurer to the
reinsurer of amounts other than from income reasonably expected from the reinsured
policies.
2. Notwithstanding subsection 1, a licensed life insurer may, with the prior approval of the
commissioner, take such reserve credit as the commissioner may deem consistent with the
insurance law or rules, including actuarial interpretations or standards adopted by the
department.
History: Effective October 1, 1989; amended effective January 1, 1992; February 28, 1992.

General Authority: NDCC 28-32-02
Law Implemented: NDCC 26.1-05-04, 26.1-05-19, 26.1-05-32
### § 45-04-11-02. Financial statement requirements.

1. No reinsurance agreement or amendment to any reinsurance agreement may be used to
reduce any liability or to establish any asset in any financial statement filed with this
department, unless the agreement, amendment, or a letter of intent has been duly executed
by both parties no later than the "as of date" of the financial statement.
2. In the case of a letter of intent, a reinsurance agreement or an amendment to a reinsurance
agreement must be executed within a reasonable period of time, not exceeding ninety days
from the execution date of the letter of intent, in order for credit to be granted for the
reinsurance ceded.
History: Effective October 1, 1989.
General Authority: NDCC 28-32-02
Law Implemented: NDCC 26.1-05-04, 26.1-05-19, 26.1-05-32
### § 45-04-11-03. Financial statement exceptions.

Notwithstanding section 45-04-11-01, licensed life insurers may continue to reduce liabilities or
establish assets in financial statements filed with this department for reinsurance ceded under types of
reinsurance agreements described in section 45-04-11-01, provided:
1. The agreements were executed and in force prior to October 1, 1989;
2. No new business is ceded under the agreements after October 1, 1989;
3. The reduction of the liability or the asset established for the reinsurance ceded is reduced to
zero by December 31, 1992, or such later date approved by the commissioner as a result of
an application made by the ceding insurer prior to December 31, 1989;
4. The reduction of the liability or the establishment of the asset is otherwise permissible under
all other applicable provisions of the insurance law or rules, including actuarial interpretations
or standards adopted by the department; and
5. The insurance department is notified, within sixty days following October 1, 1989, of the
existence of such reinsurance agreements and all corresponding credits taken in the ceding
insurer's 1988 annual statement.
History: Effective October 1, 1989.
General Authority: NDCC 28-32-02
Law Implemented: NDCC 26.1-05-04, 26.1-05-32, 26.1-05-19
