The NAIC's Reinsurance Task Force is proceeding towards an anticipated final vote in early 2007 on a proposal to change the indirect regulation of non-admitted reinsurers, which currently allows U.S. reinsureds to take statutory credit on their balance sheet for reinsurance only if such reinsurance obligations are 100% collateralized. The Task Force's web page contains the current red-lined version of the U.S. Reinsurance Collateral White Paper and Rating Proposal: an alternative procedure to grant credit for ceded reinsurance.
Reinsurance Regulation
State court rules that Liquidation Act does not force payment of IBNR claims or avoid arbitration agreements
A New Jersey Appellate Court has agreed with arguments made by the Reinsurance Association of America, holding that a court could not, under the authority of New Jersey's Insurer Liquidation Act, adopt a plan that forced reinsurers to pay claims based upon IBNR estimates, and could not abrogate arbitration provisions contained in reinsurance agreements to force that disputes be litigated in the liquidation court. In re Liquidation of Integrity Insurance Company, Case No., C-7022-86, 2006 WL 2795343 (N.J. Super. A.D. Oct. 2, 2006).
Default judgment against Bermuda subsidiary not binding on US parent
A District Court has held that a $1.5 million default judgment entered against a Bermuda insurance company that had been placed in liquidation in Bermuda was not enforceable against its Arizona-domiciled parent company. Significant factual background to the ruling may be found in a motion for summary judgment. Employers Reinsurance Corp. v. Guaranteed Financial Corp., Case No. 04-884 (D. Az. Sept. 26, 2006). A major basis for the ruling was the fact that the Bermuda authorities had siezed control of the Bermuda-domiciled company, and that the parent therefore had lost any ability to control the litigation in which the default had been entered.
California Insurance Code amended with respect to reinsurance matters
California has adopted amendments to its insurance code making changes regarding credit for reinsurance, insolvency of a ceding company, assets or deductions for reinsurance and foreign ceding insurers, and requirements with respect to the examination of reinsurance intermediaries. The new statute also requires that reinsurance intermediaries respond to subpoenas issued by arbitration panels. California Assembly Bill No. 2400, effective January1, 2007.
Nonadmitted and Reinsurance Reform Act passes House
The Nonadmitted and Reinsurance Reform Act of 2006 was passed by the House of Representatives by a vote of 417-0. The Senate is in recess for the election period, and it is not clear whether the Senate will take up this bill before the end of the year.