Lloyd’s announced that it has received approval from the New York Insurance Department to post reduced collateral on reinsurance contracts. Lloyd’s said it has been approved as a “Secure-3 reinsurer, meaning its collateral requirements will be reduced from 100 percent to 20 percent.”
Lloyd’s Director of North America, Sean McGovern commented: “”We are very pleased that the New York Insurance Department has approved our application for reduced reinsurance collateral. This decision recognizes Lloyd’s long-standing financial strength and security.
“Foreign reinsurers play an important part in supporting the US insurance industry and the steps taken by some individual states to reduce collateral requirements are to be welcomed.
“However, our goal remains the complete and consistent removal of discriminatory collateral requirements in the US.”
Source: Lloyd’s of London
IJ Ed. Note: Lloyd’s and other “Alien Reinsurers” have long contested the requirement that they post an amount equal to 100 percent of their potential reinsurance liabilities. The action by New York’s Insurance Department is therefore a major breakthrough in dismantling an unnecessary barrier. It could also lower the costs of reinsurance, as it will free up additional capital.