HARRY HUGHES, Governor

2047

unauthorized insurer concerning certain insurance under
certain circumstances; and defining a "fronting"
agreement

BY adding to

Article 48A - Insurance Code

Section 274A 436P

Annotated Code of Maryland

(1979 Replacement Volume and 1979 Supplement)

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF
MARYLAND, That section(s) of the Annotated Code of Maryland
be repealed, amended, or enacted to read as follows:

Article 48A - Insurance Code

274A 436P.

(A)  AFTER THE EFFECTIVE DATE OF THIS SECTION, AN
AUTHORIZED INSURER ISSUING COVERAGE UNDER THIS SUBTITLE MAY
NOT ENGAGE IN ANY "FRONTING" AGREEMENT WITH AN UNAUTHORIZED
INSURER WITH RESPECT TO ANY INSURANCE WRITTEN OR ISSUED IN
THIS STATE. A "FRONTING" AGREEMENT IS AN AGREEMENT BY
REINSURANCE OR OTHERWISE UNDER WHICH AN AUTHORIZED INSURER
TRANSFERS TO ONE OR MORE UNAUTHORIZED INSURERS:

(1)  SUBSTANTIALLY THE ENTIRE RISK OF LOSS UNDER
SUBSTANTIALLY ALL OF THE INSURANCE WRITTEN BY THE AUTHORIZED
INSURER IN THIS STATE;

(2)  ALL OR ONE OR MORE KINDS, LINES, TYPES, OR
CLASSES OF INSURANCE;

(3)  ALL OF THE BUSINESS PRODUCED THROUGH ONE OR
MORE AGENTS OR AGENCIES;

(4)  ALL OF THE BUSINESS IN A DESIGNATED
GEOGRAPHICAL AREA; OR

(5)  ALL OF THE BUSINESS WRITTEN ON ONE OR MORE
POLICY FORMS.

(B)  FOR PURPOSES OF THIS SECTION, AN UNAUTHORIZED
INSURER DOES NOT INCLUDE AN INSURER ON WHOSE BEHALF IS
MAINTAINED SECURITY ON DEPOSIT WITH THE COMMISSIONER IN AN
AMOUNT, WHICH WHEN ADDED TO THE ACTUAL CAPITAL AND SURPLUS
OF THE INSURER, IS EQUAL TO THE CAPITAL AND SURPLUS REQUIRED
OF AN AUTHORIZED INSURER UNDER SECTIONS 48 AND 49 OF THIS
ARTICLE. THE SECURITY MAY CONSIST OF THE FOLLOWING:

1.  CASH;

2.  GENERAL OBLIGATIONS OF, OR OBLIGATIONS
GUARANTEED BY, THE FEDERAL GOVERNMENT, THIS STATE OR ANY OF
ITS POLITICAL SUBDIVISIONS. THESE OBLIGATIONS SHALL BE
VALUED AT THE LOWER OF MARKET VALUE OR PAR VALUE; OR