The Property Casualty Insurers Association of America issued a bulletin applauding the decision by the Reinsurance Task Force of the National Association of Insurance Commissioners to table consideration of an approved list of alien reinsurers.
Calling it a move to “protect the security and solvency of U.S. insurance companies,” the PCI said that the NAIC had acted correctly in turning down the proposal from a number of foreign (alien) reinsurers that they be exempted from the current requirements that they provide 100 percent collateral on business written with U.S. primary carriers.
Lloyd’s has been the main proponent of changing the rules. After Sept. 11 it was required to come up with an additional $4.5 billion in cash and letters of credit, which are held on deposit and supervised by the New York State Insurance Commissioner. Lloyd’s Chairman, Lord Levene, has argued strongly against the requirements, claiming that they are unfair to companies and markets such as Lloyd’s, which are well regulated, financially sound, and have a longstanding presence in the U.S. market.
The NAIC task force thought otherwise, apparently swayed by arguments from the PCI and other industry organizations that “allowing primary insurers to receive credit for reinsurance from alien reinsurers (with less than 100 percent collateral) to be placed on this ‘special list,'” would create “a dangerous situation.”
The PCI said it had “opposed lowering the collateral limit for alien reinsurers and the creation of any special list of reinsurers as a threat to the solvency of U.S. companies.”
“PCI believes that the NAIC took the high ground with its decision to table this ‘approved list’ that could have had a very negative impact the solvency of U.S. primary insurers and would have added significant costs to the guaranty fund system,” stated Michael Koziol, PCI assistant vice president, regulatory and industry affairs.
He added that the “PCI wants to work with interested parties to find ways that alien reinsurers with less than 100 percent collateral can work without reducing the solvency and security of the primary insurer. At issue here is the assurance that reinsurance will be collectable in cases where a company becomes insolvent and claims need to be paid. The importance of this issue cannot be understated. PCI applauds the NAIC for its stand on this issue.”
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