A newly-enacted Florida law revises reinsurance statutes, providing insurers with credit for reinsurance and eliminating additional collateral requirements for a reinsurer if it is domiciled in a “reciprocal jurisdiction” and meets other requirements.
The measure (SB 728), signed into law by Gov. Ron DeSantis, incorporates recent changes made by the National Association of Insurance Commissioners (NAIC) to its model reinsurance law and regulation. It takes effect July 1, 2021.
The bill defines “reciprocal jurisdiction” to mean:
- A non-U.S. jurisdiction that is subject to an in-force covered agreement with the U.S. or, in the case of a covered agreement between the U.S. and the European Union (EU), an EU member state;
- A U.S. jurisdiction that meets the NAIC requirements for accreditation; or
- Any other qualified jurisdiction that meets certain statutory requirements and any additional requirements of the Florida Office of Insurance Regulation set forth in rule.
The requirements the reinsurer must meet include, but are not limited to:
- Minimum capital and surplus requirements;
- Minimum solvency or capital ratios;
- Annual confirmation from the domiciliary supervisory authority stating that the reinsurer meets the capital, surplus, and minimum solvency or capital ratio requirements; and
- Prompt claims payment practices.
The law also provides insurers with protections against reinsurer failure that include requiring the reinsurer to post collateral equal to all outstanding reinsurance liabilities in the event the reinsurer enters into receivership; requiring the reinsurer to consent to the jurisdiction of courts of the state of Florida; and requiring the reinsurer to post collateral equal to all outstanding liabilities if the reinsurer resists enforcement of a court order from a jurisdiction in which it has consented.
A 2017 agreement between the U.S. and EU commits the U.S. to phasing-out state-based reinsurance collateral requirements for EU reinsurers by 2022. The agreement further exempts EU reinsurers from current U.S. domiciliary requirements for authorized reinsurer status by creating a new, broader classification of jurisdiction called a “reciprocal jurisdiction.”
Florida Insurance Commissioner David Altmaier said SB 728 “helps provide regulatory certainty for carriers” to keep the Florida market competitive.
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