Section 1308. Reinsurance, when permitted; effect on reserves

(a) (1) Any
  authorized  insurer,  hereinafter  called  the  "ceding  insurer",  may,
  subject  to  the  limitations  of  this  chapter, reinsure its risks and
  policy liabilities in any other assuming insurer with the effects herein
  prescribed.  No  prohibition  or  limitation  in  this   chapter   shall
  invalidate any reinsurance agreement as between the parties thereto.
    (2)  (A) No credit shall be allowed, as an admitted asset or deduction
  from liability, to any ceding insurer for reinsurance ceded, renewed, or
  otherwise becoming  effective  after  January  first,  nineteen  hundred
  forty, unless:
    (i)  the  reinsurance  shall be payable by the assuming insurer on the
  basis of the  liability  of  the  ceding  insurer  under  the  contracts
  reinsured  without  diminution  because  of the insolvency of the ceding
  insurer, and
    (ii)  under  the  reinsurance  agreement  the   liability   for   such
  reinsurance  is assumed by the assuming insurer as of the same effective
  date.
    (B) Except as provided by subsection (a) of section four thousand  one
  hundred  eighteen  of  this chapter, no such credit shall be allowed any
  ceding insurer for reinsurance ceded,  renewed,  or  otherwise  becoming
  effective  after September first, nineteen hundred fifty-two, unless the
  reinsurance agreement provides that payments  by  the  assuming  insurer
  shall be made directly to the ceding insurer or its liquidator, receiver
  or statutory successor, except where:
    (i)  the  agreement specifies another payee of such reinsurance in the
  event of the insolvency of the ceding insurer, or
    (ii) the assuming insurer with the consent of the direct insureds  has
  assumed  such  policy  obligations  of  the ceding insurer as its direct
  obligations to the payees under such policies, in substitution  for  the
  obligations of the ceding insurer to such payees.
    (3)  Such  reinsurance  agreement  may  provide  that  the liquidator,
  receiver or statutory successor of an  insolvent  ceding  insurer  shall
  give  written  notice of the pendency of a claim against such insurer on
  the contract reinsured within a reasonable  time  after  such  claim  is
  filed  in the insolvency proceeding and that during the pendency of such
  claim any assuming insurer may investigate such claim and interpose,  at
  its own expense, in the proceeding where such claim is to be adjudicated
  any  defenses  which  it  deems  available  to  the  ceding company, its
  liquidator, receiver or  statutory  successor.  Such  expense  shall  be
  chargeable  subject  to  court  approval  against  the  insolvent ceding
  insurer as part of the  expense  of  liquidation  to  the  extent  of  a
  proportionate  share  of  the  benefit  which  may  accrue to the ceding
  insurer solely as a result of the defense  undertaken  by  the  assuming
  insurer.  Where  two  or more assuming insurers are involved in the same
  claim and a majority in interest elect  to  interpose  defense  to  such
  claim,  the expense shall be apportioned in accordance with the terms of
  the reinsurance agreement as though such expense had  been  incurred  by
  the ceding company.
    (b)  In  determining  the  ceding  insurer's  financial  condition, if
  reinsurance is effected by the ceding insurer in any  assuming  insurer,
  the  ceding insurer shall, in addition to any credit allowed against its
  loss reserves,  and  any  reduction  of  reserves  allowed  pursuant  to
  paragraph  nine  of subsection (a) of section one thousand three hundred
  one of this  article  for  reinsurance  recoverable  from  insurers  not
  authorized  in  this state, receive credit for reinsurance effected with
  any assuming insurer authorized to  do  such  business  in  this  state,
  calculated as follows:

    (1)  as to reinsurance of all or any part of any risk not specified in
  paragraph two hereof, by way of  deduction  from  its  unearned  premium
  liability  calculated  in  accordance with the provisions of section one
  thousand three hundred five of this article; or
    (2)  as  to  reinsurance  of  all or any part of any life insurance or
  annuity or non-cancellable disability risk, by way of deduction from its
  reserve liability, in  an  amount  not  exceeding  the  reserve  on  the
  reinsured  portion  of  such  risk  which  the ceding insurer would have
  maintained if such portion had not been reinsured.
    (c) Nothing in this section shall  be  deemed  to  permit  the  ceding
  insurer  to  receive  through the cession of all or any part of any risk
  any advantage whereby its unearned premium reserve, or the net amount of
  its valuation reserves, is reduced below the  amount  required  by  this
  chapter.
    (d) In determining its financial condition, any assuming insurer shall
  be charged:
    (1)  in  its  unearned  premium  liability with an amount equal to the
  deduction specified in paragraph one of subsection (b) hereof, and
    (2) in its valuation reserve liability with an amount at  least  equal
  to  the amount which it would be required to maintain in accordance with
  the provisions of this chapter if it were the  direct  insurer  of  such
  assumed risks on the basis specified in the reinsurance agreement.
    (e)  (1)  During  any period of twelve consecutive months, without the
  superintendent's permission:
    (A) no  domestic  insurer,  except  life,  shall  by  any  reinsurance
  agreement  or  agreements  cede  an amount of its insurance on which the
  total gross reinsurance premiums are more  than  fifty  percent  of  the
  unearned  premiums  on  the  net amount of its insurance in force at the
  beginning of such period, and
    (B) no alien insurer, except life, shall by any reinsurance  agreement
  or  agreements,  involving the withdrawal or transfer of any interest in
  any of its trusteed assets in the United States, cede an amount  of  its
  insurance  on  which  the total gross reinsurance premiums are more than
  fifty percent of  the  unearned  premiums  on  the  net  amount  of  its
  insurance  in  force  in  the  United  States,  at the beginning of such
  period.
    (2) Paragraph one hereof shall not apply to reinsurance  made  in  the
  ordinary  course of business reinsuring specified individual risks under
  reinsurance agreements relating to current business.
    (3) If any agreement or agreements at any time effect  reinsurance  of
  substantially  all of the net insurance in force of such ceding insurer,
  no credit by way of deduction pursuant to subsection (b) hereof shall be
  allowed to such ceding insurer, unless either:
    (A) the assuming insurer or insurers assume or have assumed the policy
  obligations of the ceding insurer as their  direct  obligations  to  the
  obligees  under  such  policies  and the provisions for cancellation, if
  any,  of  such  reinsurance  agreements  have  been  approved   by   the
  superintendent, or
    (B)  such  reinsurance agreement or agreements were made under pooling
  arrangements between insurers associated in  a  group  for  underwriting
  purposes  and  were  approved by the superintendent as not impairing the
  protection of policyholders of such ceding or assuming insurers.
    (f) (1) Unless the superintendent permits:
    (A) No domestic life insurance company shall (i)  reinsure  its  whole
  risk  on  any  individual  life  or  joint  lives,  or  (ii)  reinsure a
  substantial portion of its life insurance in force.

    (B) No foreign or alien insurer shall reinsure its whole risk  on  any
  individual  life  or  joint  lives,  written  under a policy or contract
  delivered or issued for delivery in this state.
    (2)  Any  domestic  life  insurance  company  proposing  to  assume by
  reinsurance all or any  part  of  the  business  in  force,  other  than
  portions  of  individual  risks,  of any domestic, foreign or alien life
  insurance company,  fraternal  benefit  society  or  other  organization
  having  outstanding  policies  or  certificates  of  life  insurance  or
  accident and health insurance or annuity contracts  shall  make  written
  application  to the superintendent for permission to do so. If after due
  consideration  the  superintendent  is  satisfied  that   the   proposed
  reinsurance  will  not  prejudice  the interests of the policyholders of
  either the applicant or the companies which  are  members  of  The  Life
  Insurance Guaranty Corporation or of The Life Insurance Company Guaranty
  Corporation of New York, he shall grant the permission.
    (3) The superintendent, after notice to and an opportunity to be heard
  by  all  domestic  life  insurance companies, may issue and from time to
  time amend regulations establishing  standards  which  tend  to  promote
  orderly growth and financial stability among the companies and otherwise
  effectuate the purposes of this subsection.
    (g)  Any  domestic life insurance company which has discontinued doing
  any new business in a foreign country may, with the  permission  of  the
  superintendent,  reinsure  all  or  any part of its risks outstanding in
  such country in any solvent  insurer  authorized  to  transact  business
  therein. Thereafter such life insurance company shall not be required to
  charge  as  liabilities the reserves and other liabilities pertaining to
  the reinsured risks.