Reinsurance Regulation

The International Association of Insurance Supervisors (“IAIS”) has released a “concept paper” describing its proposed Common Framework for the Supervision of Internationally Active Insurance Groups (“ComFrame”). This document is open for comments through August 31, 2011. As summarized in the accompanying Press Release, ComFrame will:

• Develop methods of operating group-wide supervision of Internationally Active Insurance Groups in order to make group-wide supervision more effective and more reflective of actual business practices;
• Establish a comprehensive framework for supervisors to address group-wide activities and risks and also establish principles for better supervisory cooperation in order to allow for a more integrated, international approach; and
• Foster global convergence of regulatory and supervisory measures and approaches.

The IAIS also has published a set of presentation slides which provide an overview of ComFrame.

This post written by Rollie Goss.

President Obama has nominated Roy Woodall to fill the position designated for an insurance expert on the Financial Stability Oversight Council (“FSOC”). An attorney, Mr. Woodall served as Kentucky Insurance Commissioner, was President of the National Association of Life Companies for 13 years prior to its merger with the American Council of Life Insurers (“ACLI”), and continued with the ACLI as managing director for issues and vice-president and chief counsel for state relations. He later served as a senior insurance policy analyst in the Treasury Department and as an insurance consultant for the Congressional Research Service. If confirmed by the Senate, Mr. Woodall would be the long-awaited insurance “expert” in the FSOC’s work, including its deliberations concerning the criteria for designating companies as systematically important financial institutions. There is no indication yet as to when the Senate Banking Committee might hold a confirmation hearing for Mr. Woodall. With the Congress embroiled in the issue of the national debt, and the Senate scheduled to be in recess until July 10, and from August 8 to September 5, it may be a while before Mr. Woodall actually joins in the work of the FSOC (assuming he is confirmed by the Senate).

This post written by Rollie Goss.

GTE Reinsurance Company, in runoff since 1990, proposed a commutation plan regarding its remaining potential property-casualty related liabilities. The commutation plan is essentially a statutory “solvent scheme of arrangement.” Two of GTE’s cedents objected. One challenged Rhode Island’s Voluntary Restructuring of Solvent Insurers Act, G.L. 1956 § 27-14.5-1 as unconstitutional under the Contract Clause and Due Process Clause of the Rhode Island and federal Constitutions. The court rejected the challenges, crediting the large majority of cedents (34 out of 39) that voted in favor of the plan, and noting that, while some rights under the contracts between the objectors and GTE would be impaired by the commutation, they would not be “substantially impaired” – the standard for a contract clause challenge. The court also found the Act to have a legitimate public purpose, and to employ reasonable and necessary means to carry out that purpose. It rejected the due process argument for essentially the same reasons, noting that a “Contract Clause inquiry is more searching than the rational basis review employed in a due process challenge.” In re GTE Reinsurance Co. Ltd., No. PB 10-3777 (R.I. Super. Ct. Apr. 25, 2011).

This post written by John Pitblado.