ROBERT L. EHRLICH, JR., Governor                             Ch. 119

(II)     PAYMENT FOR A COVERED REINSURED CLAIM UNDER
SUBPARAGRAPH (I) OF THIS PARAGRAPH SHALL BE MADE BY THE REINSURER ONLY
AT THE DIRECTION OF THE LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION
OR ITS DESIGNATED SUCCESSOR.

(III)   PAYMENT FOR A COVERED REINSURED CLAIM MADE BY THE
REINSURER AT THE DIRECTION OF THE LIFE AND HEALTH INSURANCE GUARANTY
ASSOCIATION OR ITS DESIGNATED SUCCESSOR DISCHARGES THE REINSURER'S
LIABILITY TO ANY OTHER PERSON FOR PAYMENT OF THE COVERED REINSURED
CLAIM.

[(b) The Commissioner may not approve or accept reinsurance by a ceding
domestic insurer if the Commissioner for good cause finds that the reinsurance would
be contrary to the interests of the policyholders or stockholders of the ceding domestic
insurer.]

(B) (1) A REINSURANCE AGREEMENT MAY PROVIDE THAT THE DOMICILIARY
RECEIVER OF AN INSOLVENT CEDING INSURER SHALL GIVE WRITTEN NOTICE TO
THE REINSURER OF THE PENDENCY OF A CLAIM MADE AGAINST THE INSOLVENT
CEDING INSURER UNDER THE CONTRACT REINSURED WITHIN A REASONABLE TIME
AFTER THE CLAIM IS FILED IN THE LIQUIDATION PROCEEDING.

(2)      DURING THE PENDENCY OF THE CLAIM, THE REINSURER, AT ITS
OWN EXPENSE, MAY INVESTIGATE THE CLAIM AND INTERPOSE, IN THE LIQUIDATION
PROCEEDING, ANY DEFENSE THAT IT DETERMINES IS AVAILABLE TO THE
INSOLVENT CEDING INSURER OR ITS RECEIVER

(3)      (I) THE REINSURER MAY FILE A CLAIM AGAINST THE INSOLVENT
CEDING INSURER FOR ANY EXPENSE INCURRED BY THE REINSURER UNDER
PARAGRAPH (2) OF THIS SUBSECTION.

(II)     THE CLAIM MAY NOT EXCEED AN AMOUNT EQUAL TO THE
PROPORTIONATE SHARE OF THE BENEFIT ACCRUING TO THE INSOLVENT CEDING
INSURER SOLELY AS A RESULT OF THE DEFENSE UNDERTAKEN BY THE REINSURER

(III)   IF TWO OR MORE REINSURERS ARE INVOLVED IN A CLAIM AND
A MAJORITY IN INTEREST ELECT TO INTERPOSE A DEFENSE TO THE CLAIM, THE
EXPENSE SHALL BE APPORTIONED IN ACCORDANCE WITH THE TERMS OF THE
REINSURANCE AGREEMENT AS THOUGH THE EXPENSE HAD BEEN INCURRED BY THE
INSOLVENT CEDING INSURER.

(c) On request of the Commissioner, a ceding insurer shall inform the
Commissioner promptly in writing of the cancellation or any other material change of
any of its reinsurance treaties or arrangements.

SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect
October 1, 2003.

Approved April 22, 2003.

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