Reinsurance Security Agreement for South Africa

Reinsurance Security Agreement Template for South Africa

A Reinsurance Security Agreement under South African law is a crucial legal document that establishes and governs the security arrangements between a reinsurer and a cedent (primary insurer). The agreement details the collateral requirements, maintenance obligations, and enforcement rights, ensuring compliance with South African insurance regulations and financial sector laws. It provides protection for the cedent by securing the reinsurer's obligations through various forms of collateral, including cash, securities, or letters of credit, while establishing clear procedures for valuation, top-up requirements, and default scenarios.

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What is a Reinsurance Security Agreement?

The Reinsurance Security Agreement is essential in the South African reinsurance market where cedents require security for their reinsurers' obligations. This document becomes necessary when a cedent seeks collateral protection for reinsurance arrangements, particularly with non-domestic reinsurers or those with specific credit ratings. The agreement must comply with South African insurance regulations, including the Insurance Act 18 of 2017 and Financial Sector Regulation Act 9 of 2017. It typically includes detailed provisions for collateral calculation, eligible assets, valuation mechanisms, and enforcement procedures. The agreement is particularly important in contexts where regulatory requirements or risk management policies mandate security arrangements for reinsurance exposures.

What sections should be included in a Reinsurance Security Agreement?

1. Parties: Identification of the contracting parties - typically the reinsurer, cedent, and any security trustee or custodian

2. Background: Context of the agreement, reference to related reinsurance agreements, and purpose of the security arrangement

3. Definitions and Interpretation: Definitions of key terms, interpretation rules, and references to relevant legislation

4. Security Creation: Establishment of security interest, nature of security, and perfection requirements

5. Secured Obligations: Definition of obligations being secured, including reference to underlying reinsurance agreements

6. Collateral Requirements: Calculation of required collateral, eligible assets, and maintenance requirements

7. Valuation and Monitoring: Process for valuing security, frequency of valuations, and monitoring requirements

8. Top-up and Release Mechanics: Procedures for increasing or releasing collateral based on value fluctuations

9. Representations and Warranties: Standard and specific representations regarding security and capacity

10. Events of Default: Definition of default events and consequences

11. Enforcement Rights: Rights and remedies upon default, including realization of security

12. Costs and Expenses: Allocation of costs related to maintaining and enforcing security

13. Notices: Communication requirements and contact details

14. Governing Law and Jurisdiction: Choice of South African law and jurisdiction provisions

15. General Provisions: Standard boilerplate clauses including amendments, assignments, and severability

What sections are optional to include in a Reinsurance Security Agreement?

1. Security Trustee Provisions: Required when a security trustee is appointed to hold security on behalf of the cedent

2. Custodian Arrangements: Required when using a third-party custodian for holding collateral

3. Letters of Credit: Specific provisions when letters of credit are used as security

4. Investment Guidelines: Required when the agreement allows for investment of collateral

5. Multiple Cedent Provisions: Required when security is shared among multiple cedents

6. Currency Provisions: Required when security is provided in multiple currencies

7. Set-off Rights: Optional provisions for set-off rights between parties

8. Tax Provisions: Detailed tax provisions when specific tax implications need to be addressed

What schedules should be included in a Reinsurance Security Agreement?

1. Schedule 1 - Form of Collateral Statement: Template for periodic reporting of collateral values and requirements

2. Schedule 2 - Eligible Assets: Detailed list of acceptable types of collateral and their valuation haircuts

3. Schedule 3 - Reinsurance Agreements: List of underlying reinsurance agreements covered by the security arrangement

4. Schedule 4 - Authorized Signatories: List of persons authorized to act under the agreement

5. Schedule 5 - Contact Details: Detailed contact information for notices and operations

6. Schedule 6 - Form of Collateral Release Request: Template for requesting release of excess collateral

7. Appendix A - Calculation Methodology: Detailed methodology for calculating collateral requirements

8. Appendix B - Operating Procedures: Day-to-day operational procedures for managing the security arrangement

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

South Africa

Publisher

Genie AI

Document Type

Security Agreement

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Insurance

Reinsurance

Financial Services

Banking

Risk Management

Professional Services

Marine Insurance

Property Insurance

Casualty Insurance

Life Insurance

Relevant Teams

Legal

Risk Management

Compliance

Insurance Operations

Treasury

Finance

Underwriting

Claims

Credit Risk

Portfolio Management

Reinsurance Operations

Actuarial

Relevant Roles

Chief Risk Officer

Reinsurance Manager

Legal Counsel

Compliance Officer

Insurance Manager

Treasury Manager

Chief Financial Officer

Collateral Manager

Risk Analyst

Insurance Operations Manager

Underwriting Manager

Claims Manager

Portfolio Manager

Credit Risk Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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