Financial Impairment of Reinsurer Clause Samples
The 'Financial Impairment of Reinsurer' clause defines the procedures and consequences that apply if a reinsurer experiences financial difficulties, such as insolvency or regulatory intervention. Typically, this clause outlines the rights of the ceding insurer to terminate or modify the reinsurance agreement, seek alternative security for recoverables, or withhold payments if the reinsurer's financial stability is compromised. Its core function is to protect the ceding insurer from the risk of non-payment or delayed payment due to the reinsurer's financial distress, thereby ensuring the continued financial security of the underlying insurance arrangements.
Financial Impairment of Reinsurer. For the purpose of this Agreement, the “Financial Impairment” of the Reinsurer shall be deemed to have occurred when:
(a) It is declared insolvent or impaired by the regulatory authority in the jurisdiction of the Reinsurer, or
(b) Its Total Adjusted Capital drops below 2.0 times its Authorized Control Level Risk Based Capital (where Total Adjusted Capital and Authorized Control Level Risk Based Capital have the definition given by the NAIC) if it is a U.S. domiciled reinsurer; or
(c) It had not satisfied the minimum capital and surplus requirement of its jurisdiction of domicile if it is not a U.S. domiciled reinsurer. In the event of the Financial Impairment of the Reinsurer, the Company may, at its option, immediately cancel this Agreement for new business by promptly providing the Reinsurer, its rehabilitator, conservator, supervisor, receiver, liquidator or statutory successor with written notice of the cancellation. Any requirement for a notification period prior to the cancellation of the Agreement would not apply under such circumstances.
Financial Impairment of Reinsurer. For the purpose of this Agreement, the “Financial Impairment” of the Reinsurer shall be deemed to have occurred when:
(a) It is declared insolvent or impaired by the regulatory authority in the jurisdiction of the Reinsurer, or
(b) Its Total Adjusted Capital drops below 2.0 times its Authorized Control Level Risk Based Capital (where Total Adjusted Capital and Authorized Control Level Risk Based Capital have the definition given by the NAIC) if it is a U.S. domiciled reinsurer; or
(c) It had not satisfied the minimum capital and surplus requirement of its jurisdiction of domicile if it is not a U.S. domiciled reinsurer. In the event of the Financial Impairment of the Reinsurer, the Company may, at its option, immediately cancel this Agreement for new business by promptly providing the Reinsurer, its rehabilitator, conservator, supervisor, receiver, liquidator or statutory successor with written notice of the cancellation. Any requirement for a notification period prior to the cancellation of the Agreement would not apply under such circumstances. For avoidance of doubt, the Company’s right to terminate for new business set forth in this paragraph is in no way affected by any right of the Reinsurer to remedy the Financial Impairment as set forth below. If the Financial Impairment of the Reinsurer is based on item (b) above, the Reinsurer has a period of ninety (90) days from the date the Financial Impairment was established to remedy the Financial Impairment (the “Remedy Period”) by restoring its Total Adjusted Capital to at least 2.0 times its Authorized Control Level Risk Based Capital for a continuous period of thirty (30) days or more and notifying the Company that it is no longer Financially Impaired. During such Remedy Period, if the Reinsurer implements and maintains one or more of the following, then the Company’s right to recapture due to Financial Impairment, as specified in Article V, shall cease with respect to such instance of Financial Impairment:
(a) restoring its Total Adjusted Capital to at least 2.0 times its Authorized Control Level Risk Based Capital; or
(b) establishment of security for the Company equal to the greater of the Reserve Credit amounts claimed by the Company or its affiliates under this Agreement on their respective statutory financial statements until such time that the Reinsurer’s Total Adjusted Capital is restored to at least 2.0 times its Authorized Control Level Risk Based Capital for a continuous period of thirty (30)...
Financial Impairment of Reinsurer. If the Reinsurer becomes financially impaired (as defined below), the Company may, at its option, recapture all of the reinsurance in force that was ceded to the Reinsurer under this Agreement, by providing the Reinsurer, its rehabilitator, conservator, liquidator or statutory successor with written notice of its intent to recapture the reinsurance in force, regardless of the duration the reinsurance has been in force or the amount retained by the Company on the policies reinsured. The effective date of a recapture would be the date on which financial impairment was established. The Reinsurer shall be considered financially impaired when: