FOR IMMEDIATE RELEASE
NAIC ADOPTS REVISIONS TO
Key Changes Permit Reduction
in Reinsurance Collateral Requirements for
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
- 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
- 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.