Risk Retention Group (E) Task Force
March 29, 2008

The Risk Retention Group (E) Task Force met on Saturday, March 29, 2008.

During this meeting, the Task Force:

• Adopted minutes from its Feb. 8, 2008, and March 14, 2008, conference calls.
• Continued its discussion on proposed reinsurance guidelines, which indicate that credit for reinsurance may be permitted in situations not meeting the criteria included in the Credit for Reinsurance models without posting collateral if: (1) the reinsurer maintains an A- or higher A.M. Best rating, maintains a minimum policyholder surplus in an amount acceptable to the commissioner based upon a review of the most recent audited financial statements and is licensed and domiciled in a jurisdiction acceptable to the commissioner; or (2) if the reinsurer satisfies various requirements, including filing audited financial statements, maintaining a premiums written to surplus ratio of not more than 3 to 1 and submitting to the examination authority of the commissioner.

  During the meeting, the Task force finalized language that indicates that the RRG may not receive credit if all policies are ceded through 100% reinsurance arrangements or another lesser percentage as determined by the domiciliary commissioner. The Task Force also finalized language indicating that the commissioner may waive the requirements that the reinsurer submit to US jurisdiction or the requirement that the reinsurer have a funds-held arrangement or similar collateral, as long as the reinsurer can show that it is sufficiently capitalized, the reinsurer is licensed and domiciled in a jurisdiction acceptable to the commissioner and the reinsurance agreement adequately protects the RRG and its policyholders. Such a waiver should be disclosed in Note 1 of the RRG's statutory annual statement.

  The Task Force adopted the reinsurance guidelines, noting that it should be included as an additional significant element in the Part A standard on Credit for Reinsurance. Although the guidelines will not be required for accreditation, a state's laws or regulations may allow a RRG licensed as a captive insurer to take credit for reinsurance without posting collateral in circumstances not contemplated by the Credit for Reinsurance models as long as the state's laws and regulations follow the adopted reinsurance guidelines.

Action Items:

1. Adopted minutes from its Feb. 8, 2008, and March 14, 2008, conference calls.

2. Adopted the reinsurance guidelines, which indicate that credit for reinsurance may be permitted in situations not meeting the criteria included in the Credit for Reinsurance models without posting collateral if certain other criteria are met such as a minimum A.M. Best rating, acceptable policyholder surplus, certain filing requirements, etc.