Florida Allows XL Re to Operate Under Lower Collateral Rule

Florida officials have agreed to allow Bermuda-based reinsurer XL Re Ltd. to participate in Florida’s insurance marketplace under rules calling for reduced collateral.

According to the Florida Office of Insurance Regulation (OIR), XL is the first Bermuda reinsurer approved to operate under the modified terms. XL already participates in the Florida market by reinsuring Florida property insurance, as well as reinsuring other lines. Earlier this year, the OIR announced a similar agreement with Hannover Re of Germany.

In 2007, Florida lawmakers passed legislation that authorized OIR to establish lower collateral requirements for alien (non-U.S.) reinsurers that are highly-rated and financially sound.

Prior to this legislative change in Florida and other states, non-U.S. based reinsurance companies were generally required to post 100 percent collateral while U.S. insurers posted no collateral. The 2007 law and subsequent rule (adopted in 2008) permits reinsurers that qualify based on their financial capabilities to operate in Florida with reduced collateral. Florida property insurers that buy qualified non-U.S. based reinsurance can still receive full accounting credit for having reinsurance.

The loosening of these restrictions could potentially attract foreign reinsurers to reinsure more Florida catastrophe risk by lowering the cost for insurers, according to OIR.

“Florida continues to lead the nation towards a more modernized regulatory framework,” said Insurance Commissioner Kevin McCarty.

XL writes property, property catastrophe, casualty, marine, aviation, financial lines, and various other reinsurance lines to insurers worldwide. The company’s financial statement–that was submitted with its application–reported capital and surplus of approximately $4.8 billion as of Dec. 31, 2009.

Topics Florida USA Legislation Reinsurance