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Bulletin No. 94-11

Trust agreements established by non-U.S insurers

Issued and entered November 30, 1994 by David J. Dykhouse, Commissioner of Insurance

Public Act 227 enacted June 27, 1994, copy attached,{Footnote 1}

{Footnote 1} Not reproduced. provided additional requirements for non-U.S. insurance companies. The Bureau recognizes that the companies are working toward compliance with the Code. This interpretive statement may be useful to the companies in establishing that appropriate and adequate assets have been deposited in trust.

Section 431c of the Michigan Insurance Code requires that the total value of assets held in trust shall at all times be at least equal to the sum of the U.S. branch's reserves and other liabilities, the minimum capital and surplus required, and any additional amounts considered necessary by the Commissioner. Section 431c requires that the trusteed assets shall be valued and limited in accordance with Section 901.

Due to the difficulty in establishing the value of certain trusteed assets, for the purpose of measuring compliance with Section 431c, the Commissioner will, pursuant to Section 436a(3)(b), disallow the value of investments in or obligations of affiliates domiciled outside the United States. Additionally, the Commissioner will disallow the value of the following assets if such assets are held in trust: (i) any interest in real estate not located in the United States; (ii) securities and obligations of issuers that are not domiciled in the United States, unless such securities or obligations are traded on a recognized United States national securities exchange or are at all times readily marketable on the United States secondary securities market with a rating of not less than BBB or above by Moody's or Standard & Poor's or are rated category 1 or 2 by the national association of insurance commissioners, or (iii) securities or obligations that are secured by any interest in real estate or other assets that are not located in the United States.

Any company failing to comply with Section 431c as described above as of December 31, 1994 will jeopardize its Certificate of Authority to transact business in Michigan.