Preamble

Preamble A. The Mississippi Insurance Department recognizes that licensed insurers routinely enter into reinsurance agreements that yield legitimate relief to the ceding insurer from strain to surplus. B. However, it is improper for a licensed insurer, in the capacity of ceding insurer, to enter into reinsurance agreements for the principal purpose of producing significant surplus aid for the ceding insurer, typically on a temporary basis, while not transferring all of the significant risks inherent in the business being reinsured. In substance or effect, the expected potential liability to the ceding insurer remains basically unchanged by the reinsurance transaction, notwithstanding certain risk elements in the reinsurance agreement, such as catastrophic mortalityor extraordinary survival. The terms of such agreements referred to herein and described in Section 4 violate: 1. Sections 83-5-35(e), 83-5-55 and 83-5-69 relating to financial statements which do not properly reflect the financial condition of the ceding insurer; 2. Sections 83-19-151, 83-19-153 and 83-19-155 relating to reinsurance reserve credits, thus resulting in a ceding insurer improperly reducing liabilities or establishing assets for reinsurance ceded; and 3. Sections 83-1-29, 83-1-155(1)(a), 83-5-17 and 83-23-1 relating to creating a situation that may be hazardous to policyholders and the people of this State.