(1)(a) A ceding captive insurer may reinsure all or any part of any particular risk or class of risks with:
1. An assuming insurer authorized by the office to transact such line of insurance or reinsurance in this state. Subject to the other requirements of this code, credit may be taken for reinsurance with an authorized insurer.
2. An assuming insurer approved by the office to transact such line of reinsurance in this state. The office shall approve only solvent insurers meeting the criteria established for authorized insurers in this state. From time to time, the office shall publish a list of insurers approved pursuant to this subsection. Subject to the other requirements of this code, credit may be taken for reinsurance with an approved reinsurer.
3. An assuming underwriting member of an insurance exchange domiciled in any other state or jurisdiction in the United States provided the insurance exchange presents to the office for its approval, and maintains, satisfactory evidence that such assuming underwriting member maintains the standards and meets the financial requirements applicable to an authorized insurer. Subject to the other provisions of this code, credit may be taken for reinsurance with members approved under this subsection by the office.
4. A group of individual unincorporated alien insurers which maintains funds in an amount not less than $50 million held in trust for United States policyholders and beneficiaries in a bank or trust company that is subject to supervision by any state of the United States or that is a member of the Federal Reserve System and which group satisfies the office by annually filing evidence that it can meet its obligations under its reinsurance agreements. Subject to the other provisions of this code, credit may be taken for reinsurance with groups approved under this subsection by the office.
(b) Credit in accounting and financial statements on account of reinsurance ceded to an unauthorized or unapproved reinsurer may be allowed only:
1. When it is demonstrated by the ceding captive insurer to the satisfaction of the office that such reinsurer maintains the standards and meets the financial requirements applicable to an authorized insurer;
2. To the extent of deposits by, or funds withheld from, such reinsurer pursuant to express provision therefor in the reinsurance contract as security for the payment of the obligations thereunder if such deposits or funds are held subject to withdrawal by, and under the control of, the ceding captive insurer or such deposits or funds are placed in trust for such purposes in a bank which is a member of the Federal Reserve System if withdrawals from the trust cannot be made without the consent of the ceding captive insurer. The funds withheld may be cash or securities which are qualified as admitted assets under part II of chapter 625 and which have a market value equal to or greater than the credit taken; or
3. To the extent that the amount of a clean and irrevocable letter of credit, issued for a term of not less than 1 year and in conformity with the requirements set forth in this subparagraph, equals or exceeds the liability of an unauthorized or unapproved reinsurer for unearned premiums, outstanding losses, and an adequate reserve for incurred but not reported losses under a specific reinsurance agreement. The requirements are that such a clean and irrevocable letter of credit be issued under arrangements satisfactory to the office as constituting security to the ceding captive insurer substantially equal to that of a deposit under subparagraph 2. and that the letter be issued by a banking institution which is a member of the Federal Reserve System and which has financial standing satisfactory to the office.
(2) The office shall disallow any credit which it finds would be contrary to the proper interests of the policyholders or stockholders of a ceding captive insurer.
(3) No credit may be allowed for reinsurance in an unauthorized or unapproved assuming insurer unless such insurer designates the Chief Financial Officer or a person resident in the United States as agent for service of process in any action arising out of, or in connection with, such reinsurance.
(4) Credit shall be allowed to any ceding captive insurer for reinsurance otherwise complying with this section only when the reinsurance is payable by the assuming insurer on the basis of the liability of the ceding captive insurer under the contract or contracts reinsured without diminution because of insolvency of the ceding captive insurer; and such credit shall be allowed to the ceding captive insurer for such reinsurance only when the reinsurance agreement provides that payments by the assuming insurer will be made directly to the ceding captive insurer or its receiver, except when:
(a) The reinsurance agreement specifically provides for payment to the named insured, assignee, or named beneficiary of the policy issued by the ceding captive insurer in the event of the insolvency of the ceding insurer; or
(b) The assuming insurer, with the consent of the named insured, has assumed the policy obligations of the ceding captive insurer as direct obligations of the assuming insurer in substitution for the obligations of the ceding insurer to the named insured.
(5) No person, other than the ceding captive insurer, has any rights against the reinsurer which are not specifically set forth in the contract of reinsurance or in a specific written, signed agreement between the reinsurer and the person.
(6) No captive insurer may knowingly accept as assuming reinsurer any risk covering a subject of insurance resident, located, or to be performed in this state and written directly by any insurer not then authorized to transact such insurance in this state, other than as to surplus lines insurance lawfully written under part VIII of chapter 626.