(a) A letter of credit may not be used to reduce any liability for reinsurance ceded to an unauthorized reinsurer in financial statements required to be filed with this department unless:

1. (1) a letter of credit, in compliance with the provisions of this Part with the filing ceding insurer as beneficiary, has been issued on or before the “as of” date of the financial statement of the ceding insurer; and
2. (2) the letter of credit, or a copy thereof, is in the possession of the beneficiary within 30 days of its issue date.

(b) The reduction for the letter of credit shall be the lesser of:

1. (1) the amount available under the letter of credit;
2. (2) the amount of reinsurance recoverables under the reinsurance agreement which the letter of credit was obtained in conjunction with; or
3. (3) as respects reinsurance agreements covering life, annuity and accident and health risks, the amount of reinsurance recoverables permitted in accordance with section 125.5 of this Title (Regulation 20).