Franklin W. Nutter, president of the Reinsurance Association of America (RAA) said reinsurance regulation goes beyond the narrow issue of collateral, and is pleased that the National Association of Insurance Commissioners (NAIC) Financial Condition Committee has directed its Reinsurance Task Force to consider the design of a revised framework for reinsurance regulation in the U.S. and related financial considerations that will examine other aspects of regulation.
Nutter said, “Reinsurance is a critical component of financial solvency for U.S. insurers. The reinsurance industry operates on a global capital business model. Regulation must reflect the evolving nature of capital management, international regulatory and accounting developments, and more contemporary credit criteria.”
Focusing on broad based risk and credit criteria, the NAIC Financial Condition Committee agreed that the critical issues that must be examined include: the appropriate risk based capital charge for reinsurance; a single home regulator for U.S. licensed reinsurers; credit and insolvency risk for cedants; regulatory reliance on risk management systems for cedants and assuming reinsurers; and coordination among regulatory authorities within the U.S. and in cross-border transactions.
“The NAIC recognizes that change in reinsurance regulation is warranted but must be pursued broadly, yet with careful attention to the impact on cedents and reinsurers,” Nutter said.
Source: Reinsurance Association of America
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