(a) A ceding insurer may elect to take credit, as an asset or as a deduction from reserves, for reinsurance recoverable involving life, annuity and accident and health risks from an assuming insurer not authorized in this State, provided such assuming insurer complies with provisions of section 125.4(a), (b), (h), or (i) of this Part. The provisions of section 125.4(c), (d), (e), (f) and (g) of this Part are inappropriate for and shall be inapplicable to reinsurance of life, annuity and accident and health risks.

1. (1) Notwithstanding the provisions of subdivision (a) of this section or the amounts of funds withheld under a reinsurance agreement from an unauthorized insurer on behalf of such reinsurance, credit taken by a ceding insurer for reinsurance ceded to an unauthorized insurer shall not exceed the aggregate of the net amount of reserves plus the liability for any unallocated amounts which has been set up and reported to the ceding insurer as being held by the assuming unauthorized insurer and by each subsequent retrocessionaire on behalf of such reinsurance.

2. (2) Paragraph (1) of this subdivision shall not apply to situations where the total reserve credit that may be granted under a reinsurance agreement is based solely upon:

   1. (i) the establishment of a liability by the ceding insurer for funds withheld under a reinsurance agreement with such unauthorized reinsurer as security for the payment of obligations thereunder; and/or
   2. (ii) the establishment of a trust agreement which complies with Part 126 of this Title (Regulation 114).

3. (3) Compliance with paragraphs (1) and (2) of this subdivision shall be on an agreement by agreement basis.

   1. (i) The report referred to in paragraph (1) of this subdivision shall be obtained by the ceding insurer from:

      1. (a) the assuming insurer, if accredited in this State, or if certified under the provisions of section 125.4(h) of this Part, or if domiciled in a reciprocal jurisdiction under the provisions of section 125.4(i) of this Part, as to the total net reserves held by it and by all retrocessionaires; or
      2. (b) the assuming insurer and from each of the retrocessionaires with respect to the net reserves held by each of them.
   2. (ii) Each such report shall be in writing, signed by an officer of the assuming insurer or the retrocessionaire that provided it and obtained by the ceding insurer prior to the filing date of ceding insurer's annual and quarterly statement. Such reports shall be maintained by the ceding insurer for three years or until the conclusion of the next regular examination conducted by the insurance department of its state of domicile, whichever is later. The superintendent may approve a plan of compliance submitted by an accredited reinsurer that would permit a certification to be attached to a reinsurance agreement with a ceding insurer in lieu of obtaining such reports.

   (4)

(b)

(d) Notwithstanding the effective date of this amendment and the provisions of subdivision (b) of this section, any reserve credit taken under reinsurance agreements executed prior to the effective date of this Part which had previously been granted by the department:

1. (1) will continue to be granted, provided no new business is ceded under the reinsurance agreement after December 31, 1988; or
2. (2) will continue to be granted through December 31, 1988 after which time credit will only be granted in accordance with the provisions of this Part.