In March, Lloyd’s Chairman Lord Peter Levene finally got the attention of U.S. regulators. At a meeting in Florida, the National Association of Insurance Commissioners agreed to set up a task force, chaired by Massachusetts Commissioner Julianne Bowler, to examine options for a reform of the U.S. rules on allowing credit for reinsurance.
The current requirements fall most heavily on Lloyd’s, due to its unique structure. Many “alien” insurers and reinsurers operate through U.S. subsidiaries that follow “normal” reserving requirements. Lloyd’s has no similar operations in the U.S., as it is a market, not a company, although it is admitted in two states — Illinois and Kentucky. Under the current 100 percent requirements Lloyd’s said its “underwriters alone have to place over $11 billion into these funds in order to underwrite business with U.S. insurers.”
Other non-U.S. companies are also often required to fund liabilities when policies are written outside of their subsidiaries.
The move to change the rules for reinsurers has advanced through the NAIC committees but its likelihood of being adopted by states is uncertain. A number of regulators oppose it, as does the American Insurance Association, which argues that “solvency protection is necessary because unlicensed reinsurers are not subject to financial regulation and review/audit by state regulators.”
Topics USA Reinsurance Lloyd's
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