2286

LAWS OF MARYLAND

Ch. 557

FOR the purpose of allowing a certain letter of credit to be
acceptable security for certain purposes; providing
additional requirements to determine who is not
considered an unauthorized insurer for certain
purposes; generally relating to the practice of
engaging in fronting agreements by insurers; and
clarifying language.

BY repealing and reenacting, with amendments,

Article 48A - Insurance Code

Section 436P

Annotated Code of Maryland

(1979 Replacement Volume and 1980 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be repealed, amended, or enacted to read as follows: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

436P.

(a)  After July 1, 1980, 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] OF 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 THAT AGREES TO THE
REQUIREMENTS OF SUBSECTION (C) OF THIS SECTION AND 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 §§ 48
and 49 of this article. The security may consist of the
following: