The Connecticut Insurance Department has issued a Bulletin (Number FS-4AR-06) relating to 2006 and 2007 financial filing requirements by accredited reinsurers, and a notice of intention to amend its regulations to delete a provision that relates to the disposition of the assets of a single beneficiary trust on the insolvency of the reinsurer/grantor.
Reinsurance Regulation
NAIC Task Force report on reinsurance collateral adopted
Although there are not yet any minutes or summary posted on the NAIC's Internet site, news reports indicate that the NAIC's Reinsurance Task Force, by a vote of 15-5, has adopted the latest draft proposal to change the collateral rules for reinsurance. Additional information will be posted here as it becomes available. Read the news story. The proposal should now go to the NAIC's Financial Condition Committee.
NAIC reinsurance credit proposal and comments posted on NAIC Internet site
The NAIC's Reinsurance Task Force has posted on its Internet page the proposal to change the present collateral-based reinsurance credit system to one based upon the financial strength of the reinsurer. Proposal to Grant Credit for Ceded Reinsurance, NAIC Reinsurance Evaluation Office (October 31, 2006 draft). Comments on the proposal have already been posted from 17 organizations, including the RAA, Lloyd's and the European Commission. Further comments may be found on the Task Force's Internet page.
UK Court denies claim over implementation of EEC Insurance Directive
The UK Commercial Court, Queen's Bench Division, has entered an extensive opinion (with an accompanying Appendix), denying claims asserted by various Names against Her Majesty's Treasury, which alleged that the Names had suffered losses at Lloyd's due to the government’s failure appropriately to implement an EEC Insurance Directive (Directive 73/239/EEC). The Names contended that as a result of the failures in the implementation process, the “true IBNR” for US asbestos-related risks were not disclosed, resulting in the Names participating in the reinsurance of such risks, when they would not have done so had they known the “true IBNR” for such risks. Poole v. Her Majesty’s Treasury, [2006] EWHC 2731 (Comm.) (Nov. 8, 2006). The Court denied the claims on two bases: (1) the Insurance Directive did not grant any relevant rights to the Names; and (2) the claims were time barred.
Insolvent insurer recoups claims payments made to insureds and retains reinsurance recovery for same claims
The Utah Supreme Court has ruled on issues relating to whether payments received under various insurance and reinsurance agreements constituted voidable preferences under the Utah Insurers Rehabilitation and Liquidation Act, holding that the payments constituted voidable preferences. Wilcox v. Anchor Wate Co., Case No. 20050324 (Utah Nov. 3, 2006). An insurer had paid claims to its insured and received reimbursement from its reinsurers. The insurer was declared insolvent, and successfully recouped the claims payments it had made to its insured as a voidable preference, even though it had received reinsurance payments. The Court held that the insured had no right to the reinsurance proceeds, and that under the liquidation statute, the insolvent insurer could keep the reinsurance payments and recoup the claim payments it had made to its insured.