ACIC Testifies Against Reinsurance Regulations for Calif. Insurers

The Association of California Insurance Companies (ACIC) is testifying against proposed Department of Insurance reinsurance regulations that the association says would make it more difficult for insurers to do business in California.

“The regulations propose unprecedented regulatory mandates on reinsurance contracts in California that would increase costs for both insurers and ultimately consumers,” said ACIC President Sam Sorich in advance of a Department of Insurance public hearing on the proposed changes. The 10 a.m. hearing will be at 300 S. Spring St., Los Angeles.

Sorich said that the regulations would impose a unique reinsurance accounting system on California-based insurers and other insurance companies doing significant amounts of business in the state. The system would impose mandates that are different than the rules established by other states, based on the National Association of Insurance Commissioners’ standards.

Sorich said the proposed regulations would make it more difficult for insurers doing business in California, and it would make it more difficult for California insurers doing business in other states because state regulators may not accept California’s unique standards.

“These regulations are unprecedented, unfair and could hurt the availability of reinsurance in California. What makes the proposed regulations even more baffling — and unwarranted — is the lack of justification or evidence that these changes are needed. Why does California need to ignore well-established standards used by every other state and head down a road that will hurt consumers? The answer, it doesn’t,” Sorich said.

He noted that reinsurance is insurance that is purchased by insurance companies to help guarantee payment of claims filed by their policyholders and other claimants – particularly large claims. Reinsurance is used for all kinds of insurance, from homeowners to large commercial properties and professional liability.

Reinsurance increases the availability of insurance for consumers, spreads risk which is especially important for catastrophe coverages, and tends to mitigate the cost of insurance.

“The proposed regulations could lead to reduced availability and higher costs for reinsurance in California. The higher costs resulting from these regulations would ultimately be borne by California businesses and consumers,” Sorich said.

The Association of California Insurance Companies (ACIC) is an affiliate of the Property Casualty Insurers Association of America (PCI).

Topics California Carriers Legislation Reinsurance