Arkansas Code Title 23. Public Utilities and Regulated Industries § 23-62-204. Allowance of credit

(a)(1) Except as provided in subsection (b) of this section, no credit shall be allowed as an asset or a deduction from liability to any ceding insurer for reinsurance unless the reinsurance contract provides that in the event of the insolvency of the ceding insurer, the reinsurance is payable under one (1) or more contracts reinsured by the assuming insurer on the basis of reported claims allowed by the liquidation court without diminution because of the insolvency of the ceding insurer.

(2) The payments shall be made directly to the ceding insurer or to its domiciliary liquidator unless:

(b)(1) If a life and health insurance guaranty association has made the election to succeed to the rights and obligations of the insolvent insurer under the contract of reinsurance, then the reinsurer's liability to pay covered reinsured claims shall continue under the contract of reinsurance, provided that the reinsurer is paid the reinsurance premiums for coverage.

(2) Payment of the reinsured claims shall be made by the reinsurer only pursuant to the direction of the guaranty association or its designated successor.

(3) Any claim payment made at the direction of the guaranty association or its designated successor by the reinsurer will discharge the reinsurer of all further liability to any other party for the payment.

(c)(1) The reinsurance agreement may provide that the domiciliary liquidator of an insolvent ceding insurer shall give written notice to the assuming insurer of the pendency of a claim against the ceding insurer on the contract reinsured within a reasonable time after the claim is filed in the liquidation proceeding.

(2) During the pendency of the claim, any assuming insurer may investigate the claim and interpose at its own expense in the proceeding any defenses which it deems available to the ceding insurer or its liquidator.

(3) The expense of asserting a defense may be filed as a claim against the insolvent ceding insurer 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.

(4) If two (2) or more assuming insurers are involved in a claim and a majority in interest elect to interpose one (1) or more defenses to the claim, the expense shall be apportioned in accordance with the terms of the reinsurance agreement as though the expense had been incurred by the ceding insurer.