§ 6906. Reinsurance. (a) For financial guaranty insurance that takes
effect on or after the effective date of this article, an insurer
authorized to transact financial guaranty insurance shall receive credit
for reinsurance, in accordance with the provisions of this chapter
applicable to property/casualty insurers, as an asset or as a reduction
from liabilities provided that such reinsurance is subject to an
agreement that, for its stated term and with respect to any such
reinsured financial guaranty insurance in force, the reinsurance
agreement (facultative or treaty) may only be terminated or amended (i)
at the option of the reinsurer or the ceding insurer, if the reinsurance
agreement provides that the liability of the reinsurer with respect to
policies in effect at the date of termination shall continue until the
expiration or cancellation of each such policy, or (ii) with the consent
of the ceding company, if the reinsurance agreement provides for a
cutoff of the reinsurance in force at the date of termination, or (iii)
at the discretion of the superintendent acting as rehabilitator,
liquidator or receiver of the ceding or assuming insurer; and provided
that such reinsurance is:

(1) placed with a financial guaranty insurance corporation licensed
under this article or an insurer writing only financial guaranty
insurance as is or would be permitted by this article; or

(2) placed with a property/casualty insurer or an accredited reinsurer
licensed or accredited to reinsure risks of every kind or description
(including municipal obligation bonds), as set forth in subsection (c)
of section four thousand one hundred two of this chapter, if the
reinsurance agreement with such insurer requires that such insurer:

(A) have and maintain surplus to policyholders of at least thirty-five
million dollars;

(B) establish and maintain the reserves required in section six
thousand nine hundred three of this article, except that if the
reinsurance agreement is not pro rata the contribution to the
contingency reserve shall be equal to fifty percent of the quarterly
earned reinsurance premium. However, the assuming insurer need not
establish and maintain such reserve to the extent that the ceding
insurer has established and continues to maintain such reserve;

(C) comply with the provisions of subsection (c) of section six
thousand nine hundred four of this article, except that the maximum
total exposures reinsured net of retrocessions and collateral shall be
one-half of that permitted for a financial guaranty insurance
corporation;

(D) if a parent of the insurer, another subsidiary of the parent of
the insurer, or a subsidiary of the insurer, then the aggregate of all
risks assumed by such reinsurers shall not exceed ten percent of the
insurer's exposures, net of retrocessions and collateral. Direct or
indirect ownership interests of fifty percent or more shall be deemed a
parent/subsidiary relationship;

(E) if an affiliate of the insurer, such affiliate shall not assume a
percentage of the insurer's total exposures insured net of retrocessions
and collateral in excess of its percentage of equity interest in the
insurer; and

(F) assumes from the financial guaranty insurer and any affiliate,
parent of the insurer, another subsidiary of the parent of the insurer,
or subsidiary of the insurer that is a financial guaranty insurance
corporation or an insurer writing only financial guaranty insurance as
is or would be permitted by this article and such other kinds of
insurance that a financial guaranty insurance corporation may write in
this state, together with all other reinsurers subject to this
paragraph, less than fifty percent of the total exposures insured by the
financial guaranty insurer and such affiliates, parents or subsidiaries
of the insurer, net of collateral, remaining after deducting any
reinsurance placed with another financial guaranty insurance corporation
that is not an affiliate, a parent of the financial guaranty insurer,
another subsidiary of the parent of the insurer, or a subsidiary of the
insurer or a financial guaranty insurer writing only financial guaranty
insurance as is or would be permitted by this article that is not an
affiliate, a parent of the financial guaranty insurer, another
subsidiary of the parent of the insurer, or a subsidiary of the insurer;
or

(3) if placed with an unauthorized or unaccredited reinsurer which
otherwise meets the requirements of either the opening paragraph of this
subsection and paragraph one of this subsection, or the opening
paragraph of this subsection and subparagraphs (A), (D), (E) and (F) of
paragraph two of this subsection, in an amount not exceeding the
liabilities carried by the ceding insurer for amounts withheld under a
reinsurance treaty with such reinsurer or amounts deposited by such
reinsurer as security for the payment of obligations under the treaty if
such funds or deposit are held subject to withdrawal by, and under the
control of, the ceding insurer.

(b) In determining whether the insurer meets the aggregate risk
limitations, in addition to credit for other types of qualifying
reinsurance, the insurer's aggregate risk may be reduced to the extent
of the limit for aggregate excess reinsurance, but in no event in an
amount greater than the amount of the aggregate risks which will become
due during the unexpired term of such reinsurance agreement in excess of
the insurer's retention pursuant to such reinsurance agreement.