NAIC to Examine Proposal to Modify Reinsurance Collateral Requirements

The National Association of Insurance Commissioners (NAIC) has adopted its Reinsurance Regulatory Modernization Framework Proposal, which modernizes U.S. state-based regulation of reinsurance.

“This proposal sets forth a conceptual framework only,” explained New Jersey Banking and Insurance Commissioner Steven M. Goldman, chair of the NAIC Reinsurance Task Force, which drafted the proposal. “Now, we must focus on developing the specifics of this new regulatory regime and taking the appropriate legislative steps to make the proposal a reality.”

The NAIC described the proposal as creating “two new classes of reinsurers in the United States: U.S.-domiciled national reinsurers and non-U.S.-based port of entry (POE) reinsurers.”

It also “introduces modified collateral requirements for eligible reinsurers,” and establishes a “new framework for state-based reinsurance regulation based on the concepts of supervisory recognition, single-state licensure for U.S. reinsurers and single-state certification for non-U.S. reinsurers from approved jurisdictions.”

The announcement received a strong approval from Lloyd’s (See following article), which has been in the forefront of efforts to modernize the collateral requirements.

The NAIC proposes to create “the NAIC Reinsurance Supervision Review Department (RSRD), which will evaluate the reinsurance supervisory regimes of other countries and establish standards for a state to be certified to regulate reinsurance on a cross-border basis,” said the bulletin. “In order to be certified as a POE reinsurer, a reinsurer must be licensed by a non-U.S. jurisdiction recommended as eligible for recognition by the RSRD.

The following “Principles for the Creation of the RSRD” will be used to guide the Task Force as the implementation process proceeds:
— The RSRD should be created as a transparent, publicly accountable entity (contemplated to be part of the NAIC), with a governing board composed of state or district insurance regulators, and with director eligibility open to all state or district insurance commissioners, directors and superintendents.
— RSRD criteria relating to ceded premium volume will not unfairly discriminate against otherwise qualified small jurisdictions from approval as a home state or POE state supervisor.

The current NAIC Credit for Reinsurance Model Act remains in place for reinsurers that do not choose to become either national or POE reinsurers.

For more information, visit www.naic.org/committees_e_reinsurance.htm.

Source: National Association of Insurance Commissioners – www.naic.org

Topics USA Legislation Reinsurance