§ 1308. Reinsurance, when permitted; effect on reserves. (a) (1) Any\nauthorized insurer, hereinafter called the "ceding insurer", may,\nsubject to the limitations of this chapter, reinsure its risks and\npolicy liabilities in any other assuming insurer with the effects herein\nprescribed. No prohibition or limitation in this chapter shall\ninvalidate any reinsurance agreement as between the parties thereto.\n (2) (A) No credit shall be allowed, as an admitted asset or deduction\nfrom liability, to any ceding insurer for reinsurance ceded, renewed, or\notherwise becoming effective after January first, nineteen hundred\nforty, unless:\n (i) the reinsurance shall be payable by the assuming insurer on the\nbasis of the liability of the ceding insurer under the contracts\nreinsured without diminution because of the insolvency of the ceding\ninsurer, and\n (ii) under the reinsurance agreement the liability for such\nreinsurance is assumed by the assuming insurer as of the same effective\ndate.\n (B) Except as provided by subsection (a) of section four thousand one\nhundred eighteen of this chapter, no such credit shall be allowed any\nceding insurer for reinsurance ceded, renewed, or otherwise becoming\neffective after September first, nineteen hundred fifty-two, unless the\nreinsurance agreement provides that payments by the assuming insurer\nshall be made directly to the ceding insurer or its liquidator, receiver\nor statutory successor, except where:\n (i) the agreement specifies another payee of such reinsurance in the\nevent of the insolvency of the ceding insurer, or\n (ii) the assuming insurer with the consent of the direct insureds has\nassumed such policy obligations of the ceding insurer as its direct\nobligations to the payees under such policies, in substitution for the\nobligations of the ceding insurer to such payees.\n (3) Such reinsurance agreement may provide that the liquidator,\nreceiver or statutory successor of an insolvent ceding insurer shall\ngive written notice of the pendency of a claim against such insurer on\nthe contract reinsured within a reasonable time after such claim is\nfiled in the insolvency proceeding and that during the pendency of such\nclaim any assuming insurer may investigate such claim and interpose, at\nits own expense, in the proceeding where such claim is to be adjudicated\nany defenses which it deems available to the ceding company, its\nliquidator, receiver or statutory successor. Such expense shall be\nchargeable subject to court approval against the insolvent ceding\ninsurer as part of the expense of liquidation to the extent of a\nproportionate share of the benefit which may accrue to the ceding\ninsurer solely as a result of the defense undertaken by the assuming\ninsurer. Where two or more assuming insurers are involved in the same\nclaim and a majority in interest elect to interpose defense to such\nclaim, the expense shall be apportioned in accordance with the terms of\nthe reinsurance agreement as though such expense had been incurred by\nthe ceding company.\n (b) In determining the ceding insurer's financial condition, if\nreinsurance is effected by the ceding insurer in any assuming insurer,\nthe ceding insurer shall, in addition to any credit allowed against its\nloss reserves, and any reduction of reserves allowed pursuant to\nparagraph nine of subsection (a) of section one thousand three hundred\none of this article for reinsurance recoverable from insurers not\nauthorized in this state, receive credit for reinsurance effected with\nany assuming insurer authorized to do such business in this state,\ncalculated as follows:\n (1) as to reinsurance of all or any part of any risk not specified in\nparagraph two hereof, by way of deduction from its unearned premium\nliability calculated in accordance with the provisions of section one\nthousand three hundred five of this article; or\n (2) as to reinsurance of all or any part of any life insurance or\nannuity or non-
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