Notwithstanding other provisions of this chapter, when a trust agreement is established in conjunction with a reinsurance agreement covering risks other than life, annuities, and accident and health, where it is customary practice to provide a trust agreement for a specific purpose, such a trust agreement may provide that the ceding insurer shall undertake to use and apply amounts drawn upon the trust account, without diminution because of the insolvency of the ceding insurer or the assuming insurer, for the following purposes:

1. (1) To pay or reimburse the ceding insurer for the assuming insurer's share under the specific reinsurance agreement regarding any losses and allocated loss expenses paid by the ceding insurer but not recovered from the assuming insurer or for unearned premiums due to the ceding insurer if not otherwise paid by the assuming insurer;
2. (2) To make payment to the assuming insurer of any amounts held in the trust account that exceed 102 percent of the actual amount required to fund the assuming insurer's obligations under the specific reinsurance agreement; or

3. (3) If the ceding insurer has received notice of termination of the trust account and the assuming insurer's entire obligations under the specific reinsurance agreement remain unliquidated and undischarged ten days before the termination date, to withdraw amounts equal to the obligations and deposit those amounts in a separate account in the name of the ceding insurer in any qualified United States financial institution, as defined in SDCL 58-14-23, apart from its general assets, in trust for the uses and purposes specified in subdivisions (1) and (2) of this section, that may remain executory after the withdrawal and for any period after the termination date.

   The reinsurance agreement entered into in conjunction with the trust agreement may contain the provisions required by subdivision 20:06:31:11(2), but need not contain them if these required conditions are included in the trust agreement.

Source: 22 SDR 52, effective October 25, 1995.

General Authority: SDCL 58-14-17.

Law Implemented: SDCL 58-14-11 to 58-14-13 , 58-14-17 , 58-14-23.