(a) When a letter of credit is obtained in conjunction with a reinsurance agreement, then such reinsurance agreement must contain provisions which:

1. (1) require the reinsurer to be the applicant for and to provide letters of credit to the ceding insurer and specify what recoverables and/or reserves are covered;

2. (2) stipulate that the reinsurer and ceding insurer agree that the letters of credit provided by the reinsurer pursuant to the provisions of the reinsurance agreement may be drawn upon at any time, notwithstanding any other provisions in the reinsurance agreement, and be utilized by the ceding insurer or any successor by operation of law of the ceding insurer including, without limitation, any liquidator, rehabilitator, receiver or conservator of such insurer for the following purposes:

   1. (i) to reimburse the ceding insurer for the reinsurer's share of premiums returned to the owners of policies reinsured under the reinsurance agreement on account of cancellations of such policies;
   2. (ii) to reimburse the ceding insurer for the reinsurer's share of surrenders and benefits or losses paid by the ceding insurer under the terms and provisions of the policies reinsured under the reinsurance agreement;
   3. (iii) to fund an account with the ceding insurer in an amount at least equal to the deduction, for reinsurance ceded, from the ceding insurer's liabilities for policies ceded under the agreement. Such amount shall include, but not be limited to, amounts for policy reserves, reserves for claims and losses incurred (including losses incurred but not reported), loss adjustment expenses, and unearned premiums; and

   4. (iv) to pay any other amounts the ceding insurer claims are due under the reinsurance agreement:

      All of the foregoing should be applied without diminution because of insolvency on the part of the ceding insurer or the reinsurer.

(b) Nothing contained in subdivision (a) of this section shall preclude the ceding insurer and reinsurer from providing for:

1. (1) an interest payment, at a rate not in excess of the prime rate of interest, on the amounts held pursuant to subparagraph (a)(2)(iii) of this section; and/or
2. (2) the return of any amounts drawn on the letters of credit in excess of the actual amounts required for subparagraphs (a)(2)(i), (ii) and (iii) of this section or, in the case of subparagraph (a)(2)(iv) of this section, any amounts that are subsequently determined not to be due.