A. An asset or a reduction from liability for the reinsurance ceded by a domestic insurer to an assuming insurer that does not meet the requirements of section 20-3602 shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer. The director may adopt by rule pursuant to section 20-3604, subsection B specific additional requirements relating to or prescribing any or all of the following:

1. 1. The valuation of assets or reserve credits.
2. 2. The amount and forms of security supporting reinsurance arrangements described in subsection B of this section.
3. 3. The circumstances pursuant to which credit will be reduced or eliminated.

B. The reduction shall be in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the ceding insurer, under a reinsurance contract with the assuming insurer as security for the payment of obligations thereunder, if the security is held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer or, in the case of a trust, held in a qualified United States financial institution as defined in section 20-3601, subsection B. This security may be in the form of:

1. 1. Cash.
2. 2. Securities listed by the securities valuation office of the national association of insurance commissioners, including those deemed exempt from filing as defined by the purposes and procedures manual of the securities valuation office, and qualifying as admitted assets.
3. 3. Clean, irrevocable and unconditional letters of credit, issued or confirmed by a qualified United States financial institution, as defined in section 20-3601, subsection A, effective not later than December 31 of the year for which the filing is being made, and in the possession of, or in trust for, the ceding insurer on or before the filing date of its annual statement. Letters of credit that meet applicable standards of issuer acceptability as of the dates of their issuance or confirmation, notwithstanding the issuing or confirming institution's subsequent failure to meet applicable standards of issuer acceptability, shall continue to be acceptable as security until their expiration, extension, renewal, modification or amendment, whichever occurs first.
4. 4. Any other form of security acceptable to the director.