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FOR IMMEDIATE RELEASE

NAIC ADOPTS REVISIONS TO
REINSURANCE MODELS

Key Changes Permit Reduction in Reinsurance Collateral Requirements for
Non-U.S. Reinsurers

WASHINGTON, D.C. (Nov. 7, 2011) — The National Association of Insurance Commissioners (NAIC) adopted revisions to the Credit For Reinsurance Model Law and Regulation, which modernizes U.S. state-based regulation of reinsurance by reducing reinsurance collateral requirements for non-U.S. reinsurers.

“The NAIC achieved unanimous support of the proposed reinsurance reforms with significant input and assistance from the domestic and international insurance community,” said New Jersey Banking and Insurance Commissioner Thomas B. Considine, Chair of the NAIC Reinsurance Task Force, which drafted the revisions.

“The NAIC has worked diligently on this project for a number of years, and we believe we have delivered well-crafted legislation that will modernize reinsurance solvency regulation by the states,” said Joseph Torti, III, Rhode Island Deputy Director and Superintendent of Insurance and Banking, and Chair of the NAIC Financial Condition Committee, which oversees the work of the Reinsurance Task Force.

Under the current NAIC Credit for Reinsurance Model Law & Regulation, in order for U.S. ceding companies to receive reinsurance credit, the reinsurance must either be ceded to U.S. licensed reinsurers or secured by collateral representing 100% of U.S. liabilities for which the credit is recorded. The revisions to the reinsurance models would reduce these reinsurance collateral requirements for non-U.S. licensed reinsurers domiciled in qualified jurisdictions.

Other key elements of the revisions include:

  • A state will evaluate a reinsurer that applies for certification, and will assign a rating based on the evaluation. A certified reinsurer will be required to post collateral in an amount that corresponds with its assigned rating (0%, 10%, 20%, 50%, 75% or 100%), in order for a U.S. ceding insurer to be allowed full credit for the reinsurance ceded.
  • Each state will have the authority to certify reinsurers, or a commissioner has the authority to recognize the certification issued by another NAIC-accredited state.
  • The NAIC will publish a list of qualified non-U.S. jurisdictions. The commissioner must document any reasons for approving a jurisdiction not on this list.
  • A new notification provision was added requiring a U.S. ceding insurer to notify its domestic regulator if reinsurance ceded to an individual reinsurer or group of affiliated reinsurers exceeds certain specified amounts.

Click HERE for more information on the Reinsurance Task Force.

 

About the NAIC

The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S. For more information, visit www.naic.org.

 

 

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