State insurance regulators are throwing their weight behind a federal measure that would change the way reinsurance is regulated.
The National Association of Insurance Commissioners (NAIC) is supporting the Reinsurance Regulatory Modernization Act of 2009, which has not yet been officially filed but which they say would modernize the regulation of reinsurance by states.
The legislation would create two new classes of reinsurers in the U.S.: National Reinsurers (U.S.) and Port of Entry Reinsurers (non-U.S.). In order to transact reinsurance business in the U.S., National Reinsurers would be licensed through a single home state, while Port of Entry reinsurers would be certified through a single Port of Entry state.
State insurance supervisors would be responsible for evaluating their respective reinsurers and establishing appropriate collateral requirements for reinsurance agreements.
Current collateral obligations for non-U.S. reinsurers would be reduced and possibly even eliminated under the reform based on a ratings system.
States reinsurance requirements different from the federal legislation would be preempted.
Reinsurers would continue to have the option of operating under the existing regulatory approach.
The legislation also creates a Reinsurance Supervision Review Board as a federal entity responsible for evaluating states and non-U.S. jurisdictions.
“The NAIC has endorsed the proposed federal legislation to facilitate cross-border reinsurance transactions and enhance competition within the U.S. market, while ensuring that U.S. insurers and policyholders are adequately protected against the risk of insolvency,” said Roger Sevigny, NAIC president and New Hampshire insurance commissioner.
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