§ 6048d. Licensing; authority
(a) A special purpose financial insurance company may reinsure the risks of a ceding insurer
only. A special purpose financial insurance company may purchase reinsurance to cede
the risks assumed under a reinsurance contract, subject to the prior approval of the
Commissioner.
(b) In conjunction with the issuance of a license to a special purpose financial insurance
company, the Commissioner may issue an order that includes any provisions, terms,
and conditions regarding the organization, licensing, and operation of the special
purpose financial insurance company that are deemed appropriate by the Commissioner
and that are not inconsistent with the provisions of this chapter. Except as provided
in sections 6048l and 6048m of this subchapter, a license issued to a special purpose
financial insurance company pursuant to this chapter and any order issued to a special
purpose financial insurance company pursuant to this subsection shall not be revoked,
suspended, amended, or modified other than as follows:
(1) the special purpose financial insurance company consents to such revocation, suspension,
amendment, or modification; or
(2) the Commissioner makes a showing of clear and convincing evidence demonstrating that
such revocation, suspension, amendment, or modification is necessary to avoid irreparable
harm to the special purpose financial insurance company or to the ceding insurer.
(c) To qualify for a license, a special purpose financial insurance company shall be subject,
in addition to the requirements of subsection 6002(c) of this chapter, to the following:
(1) The special purpose financial insurance company’s plan of operation shall include:
(A) a complete description of all significant transactions, including reinsurance, reinsurance
security arrangements, securitizations, related transactions or arrangements, and,
to the extent not included in the transactions listed in this subdivision (A), a complete
description of all parties other than the special purpose financial insurance company
and the ceding insurer that will be involved in the issuance of special purpose financial
insurance company securities and a description of any pledge, hypothecation, or grant
of a security interest in any of the special purpose financial insurance company’s
assets and in any stock or limited liability company interest in the special purpose
financial insurance company;
(B) the source and form of the special purpose financial insurance company’s capital and
surplus;
(C) the proposed investment policy of the special purpose financial insurance company;
(D) a description of the underwriting, reporting, and claims payment methods by which
losses covered by the reinsurance contract are reported, accounted for, and settled;
(E) pro forma balance sheets and income statements illustrating one or more adverse case
scenarios, as determined under criteria required by the Commissioner, for the performance
of the special purpose financial insurance company under all reinsurance contracts;
and
(F) the proposed rate and method for discounting reserves, if the special purpose financial
insurance company is requesting authority to discount its reserves.
(2) The special purpose financial insurance company shall submit an affidavit of its president,
a vice president, the treasurer, or the chief financial officer or, in the case of
a special purpose financial insurance company formed as a limited liability company
or as a reciprocal insurer, of an individual authorized by the governing board that
includes the following statements, to the best of such person’s knowledge and belief
after reasonable inquiry:
(A) the proposed organization and operation of the special purpose financial insurance
company comply with all applicable provisions of this chapter;
(B) the special purpose financial insurance company’s investment policy reflects and takes
into account the liquidity of assets and the reasonable preservation, administration,
and management of such assets with respect to the risks associated with the reinsurance
contract and the insurance securitization transaction; and
(C) the reinsurance contract and any arrangement for securing the special purpose financial
insurance company’s obligations under such reinsurance contract, including any agreements
or other documentation to implement such arrangement, comply with the provisions of
this subchapter.
(3) The application shall include copies of all agreements and documentation described
in subdivision (1) of this subsection (c) unless otherwise approved by the Commissioner
and any other statements or documents required by the Commissioner to evaluate the
special purpose financial insurance company’s application for licensure.
(4) The application shall include an opinion of qualified legal counsel, in a form acceptable
to the Commissioner, that the offer and sale of any special purpose financial insurance
company securities complies with all applicable registration requirements or applicable
exemptions from or exceptions to such requirements of the federal securities laws
and that the offer and sale of securities by the special purpose financial insurance
company itself comply with all registration requirements or applicable exemptions
from or exceptions to such requirements of the securities laws of this State. Such
opinions shall not be required as part of the application if the special purpose financial
insurance company includes a specific statement in its plan of operation that such
opinions will be provided to the Commissioner in advance of the offer or sale of any
special purpose financial insurance company securities.
(d) The Commissioner may grant a license, which shall be valid through the next April
1 following the date of initial issuance and may be renewed annually thereafter, authorizing
the special purpose financial insurance company to transact reinsurance business as
a special purpose financial insurance company in this State upon finding that:
(1) the proposed plan of operation provides for a reasonable and expected successful operation;
(2) the terms of the reinsurance contract and related transactions comply with this subchapter;
(3) the proposed plan of operation is not hazardous to any ceding insurer; and
(4) the insurance regulator of the state of domicile of each ceding insurer has notified
the Commissioner in writing or otherwise has provided assurance satisfactory to the
Commissioner that it has approved or has not disapproved the transaction, provided
that the Commissioner shall not be precluded from issuing a license to a special purpose
financial insurance company in the event that the insurance regulator of the state
of domicile of a ceding insurer has not responded with respect to all or any part
of the transaction.
(e) The special purpose financial insurance company shall provide the Commissioner with
a copy of a complete set of executed documentation of an insurance securitization
no later than 30 days after the closing on the transactions for such securitization.
(f) Subdivision 6002(c)(3) of this chapter shall apply to all information submitted pursuant
to subsections (c) and (e) of this section and to any order issued to the special
purpose financial insurance company pursuant to subsection (b) of this section. (Added 2007, No. 49, § 17; amended 2013, No. 29, § 55, eff. May 13, 2013; 2025, No. 23, § 13, eff. July 1, 2025.)