S.B. 165                                                  VETOES

(c) "Reinsurer" means an insurer from which a ceding insurer procures
insurance for itself for all or part of an insurance risk.

5-904.

(a) (1) Credit may not be allowed, as an asset or deduction from liability, to
a ceding insurer for reinsurance unless:

[(1)] (I) the reinsurer is authorized to transact insurance business in
the State or is a solvent insurer approved or accepted by the Commissioner for the
purpose of reinsurance; and

[(2)] (II) the reinsurance [is] CONTRACT PROVIDES, IN SUBSTANCE,
THAT IN THE EVENT OF THE INSOLVENCY OF THE CEDING INSURER, THE
REINSURANCE SHALL BE payable UNDER THE TERMS OF A CONTRACT REINSURED by
the reinsurer on the basis of [the liability of the ceding insurer under the contracts
reinsured] REPORTED CLAIMS ALLOWED BY THE COURT IN A LIQUIDATION
PROCEEDING, without diminution because of the insolvency of the ceding insurer.

(2)      PAYMENTS MADE BY A REINSURER UNDER PARAGRAPH (1)(II) OF
THIS SUBSECTION SHALL BE MADE DIRECTLY TO THE CEDING INSURER OR ITS
DOMICILIARY RECEIVER UNLESS:

(I)      THE REINSURANCE CONTRACT OR OTHER. WRITTEN
AGREEMENT SPECIFICALLY PROVIDES ANOTHER PAYEE OF THE REINSURANCE IN
THE EVENT OF THE INSOLVENCY OF THE CEDING INSURER; OR

(II)     SUBJECT TO ANY CONTRACTUAL OR STATUTORY
REQUIREMENT OF CONSENT BY THE POLICYHOLDER, THE REINSURER HAS ASSUMED
THE POLICY OBLIGATIONS OF THE CEDING INSURER AS DIRECT OBLIGATIONS OF
THE REINSURER TO THE PAYEES UNDER THE POLICIES AND IN SUBSTITUTION FOR
THE CEDING INSURER'S OBLIGATIONS TO THE PAYEES.

(3)      (I) NOTWITHSTANDING PARAGRAPH (2) OF THIS SUBSECTION, IF A
LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION HAS ELECTED TO SUCCEED
TO THE RIGHTS AND OBLIGATIONS OF AN INSOLVENT INSURER UNDER A
REINSURANCE CONTRACT, THE REINSURER'S LIABILITY TO PAY COVERED
REINSURED CLAIMS SHALL CONTINUE UNDER THE REINSURANCE CONTRACT,
SUBJECT TO THE PAYMENT OF PREMIUMS TO THE REINSURER FOR THE
REINSURANCE COVERAGE.

(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,

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