Florida Insurance Regulators held a workshop Monday to seek public input on a draft rule that would implement new legislation which gives the insurance commissioner discretion in allowing unaccredited reinsurance companies to conduct business in Florida without having to post 100 percent collateral.
The workshop was part of the Florida Office of Insurance Regulation continuing effort to find alternative approaches to improve Florida’s property insurance market.
Earlier this year, the Florida Legislature passed a law that gives the insurance commissioner the ability to establish lower collateral requirements for foreign reinsurers that are highly rated and financially sound. The Office is exploring whether this may lead to more reinsurance capacity to increase the supply of insurance in the Florida market.
“Allowing foreign reinsurers to conduct business with Florida insurers without requiring them to post millions of dollars in collateral will lead to increased capital and competition in our state,” said Commissioner Kevin McCarty. “These factors will help to stabilize and potentially reduce property insurance rates.”
If an insurer buys reinsurance from a reinsurer which is authorized or accredited in Florida, the insurer gets a favorable accounting credit. U.S.-licensed and Florida-accredited reinsurers do not have to post collateral under current law.
For an insurer to get favorable accounting credit for reinsurance purchased from an unaccredited reinsurer, even if the unaccredited reinsurer is worth billions of dollars and regulated by a European country, the reinsurer has traditionally been required to post collateral for the full amount of the risk transferred. This collateral requirement is a barrier to investment by foreign reinsurers in the Florida market. In Florida, the majority of the residential property risk is reinsured by non-U.S. insurance companies already.
Source: Florida Office of Insurance Regulation
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