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Accounting for Reinsurance

AIG MIGHT GAIN ACCESS TO ELIOT SPITZER’S PERSONAL EMAILS IN CONNECTION WITH REINSURANCE ENFORCEMENT ACTION

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In 2005, former New York Attorney General Eliot Spitzer commenced a civil enforcement action against AIG, AIG’s former CEO, and AIG’s former CFO Howard Smith for allegedly engaging in fraudulent reinsurance transactions. In response, Smith submitted a Freedom of Information Law (“FOIL”) request seeking the disclosure of the AG’s communications with the press regarding the complaint. A New York Supreme Court held that the AG’s office has a responsibility and obligation to gain access to Spitzer’s personal email account to determine if it contains documents that should be disclosed in accordance with the FOIL request. The court, however, also allowed the AG’s office to appeal the issue. On appeal, the Appellate Division determined that Spitzer is a necessary party and remanded the case without deciding the issue so the Supreme Court can order Spitzer’s joinder. Smith v. New York State Office of the Attorney General, No. 515758 (N.Y. App. Div. Oct. 17, 2013).

This post written by Abigail Kortz.

See our disclaimer.

MORE TRACTION FOR THE CREDIT FOR REINSURANCE MODELS

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In an effort to implement reduced collateral requirements for ceding insurers, New Hampshire and Delaware have both enacted legislation that conforms with the NAIC’s amendments to its Credit for Reinsurance Model Law and Regulations. New Hampshire’s amended Reinsurance law, introduced as House Bill 231 on January 1, 2013, took effect on September 13, 2013. N.H. Rev. Stat. Ann. § 405:45-:52-a. New Hampshire is also considering amending its related regulation, N.H. Code Admin. R. Ins. 600, as originally proposed on July 18, 2013. Delaware’s amended Credit for Reinsurance regulation was first published for comments on May 1, 2013, and became effective on August 15, 2013. 18 Del. Admin. Code § 1003. Though not a Model state, Hawaii also recently adopted amendments, effective July 1, 2013, relating to conditions under which risk retention captive insurers may qualify for reinsurance credits on risks ceded to a reinsurer. Haw. Rev. Stat. § 431:19-111.

This post written by Kyle Whitehead.

See our disclaimer.

NAIC TAKES FURTHER ACTION ON CAPTIVES – TRANSACTION LEVEL REVIEWS TO COME

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We have previously posted on the NAIC’s initiatives with respect to captives and the NY Department’s captives report. The NAIC’s Executive Committee and Plenary, in a joint teleconference, have adopted the Reinsurance Task Force’s proposed White Paper on the activities of captives. Activity regarding captives at the NAIC continues on several fronts, including:

Financial Analysis Working Group of the Financial Condition (E) Committee

Additional responsibilities relating to captives have been assigned to this working group:

  • Perform analytical reviews of transactions (occurring on or after a date as determined by the NAIC membership) by nationally significant US life insurers to reinsure XXX and/or AXXX reserves with affiliated captives, special purpose vehicles (SPVs), or any other US entities that are subject to different solvency regulatory requirements than the ceding life insurers, to preserve the effectiveness and uniformity of the solvency regulatory system.
  • For such transactions entered into and approved prior to this date and still in place, collect specified data in order to provide regulatory insight into the prevalence and significance of these transactions throughout the industry.
  • Provide recommendations to the domiciliary state regulator to address company specific concerns and to the PBR Implementation (EX) Task Force to address issues and concerns regarding the solvency regulatory system.

It was noted that some state insurance departments already conduct reviews of some individual transactions involving captives.

Principle-Based Reserving Implementation (EX) Task Force of the Executive (EX) Committee

This task force will consider the Report’s recommendations in the context of the proposed Principal-Based Reserving system and make further recommendations, if any, to the Executive (EX) Committee. This activity may be conducted through a new Captive Working Group, which will report to this task force. The Captive Working Group will consider the following issues:

  • Address any remaining XXX and AXXX problems without encouraging formation of significant legal structures utilizing captives to cede business;
  • Address confidentiality of information; and
  • Recommend enhancement to the Financial Analysis Handbook Guidance to allow for a consistent approach for states’ review and ongoing analysis of transactions involving captives and SPVs.

Blanks Working Group of the Accounting Practices and Procedures Task Force of the Financial Condition (E) Committee

This working group is evaluating an exposure draft of a definition of “captive affiliate,” which, if adopted, would result in enhanced disclosure in Schedule F of transactions with captives. (see recent agenda item).

Reinsurance Task Force of the Financial Condition (E) Committee

The Reinsurance Task Force may implement other recommendations from the White Paper.

This post written by Rollie Goss.

See our disclaimer.

FURTHER DEVELOPMENT IN STATE CREDIT FOR REINSURANCE REQUIREMENTS

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As the legislative seasons comes to a close in many states, several states have enacted modifications to their credit for reinsurance requirements to move towards the revised Credit for Reinsurance Model Act. The Missouri legislature adopted HB 133 and the Rhode Island legislature adopted HB 5608. The Georgia Department of Insurance adopted regulations (120-2-78) designed to help implement the Georgia legislature’s earlier adoption of revised credit for reinsurance requirements.

This post written by Rollie Goss.

See our disclaimer.

ALABAMA, PENNSYLVANIA, AND LOUISIANA ADOPT CREDIT FOR REINSURANCE REGULATIONS

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Alabama, Pennsylvania, and Louisiana have joined the ranks of several other states that have adopted regulations nearly identical to the NAIC Credit for Reinsurance Model Regulation, which allows a ceding insurer to receive a credit for reinsurance as an asset or reduction from liability when insurance is ceded to a reinsurer that meets certain requirements. Alabama’s Credit for Reinsurance Regulation passed the House and the Senate on April 18, 2013 and May 2, 2013, respectively, and takes effect on January 1, 2014. H. B. 199, Reg. Sess. (Ala. 2013). Pennsylvania amended its Requirements for Qualified and Certified Reinsurers on May 25, 2013 with an effective date of June 24, 2013 to mirror recent amendments to the NAIC Model Regulation. Pa. Ins. Dep’t., Requirements for Qualified and Certified Reinsurers, 43 Pa.B. 2816 (May 25, 2013). Louisiana passed a bill effective May 23, 2013 which allows reinsurance credits to captive insurers under certain conditions. S. B. 120, Reg. Sess. (La. 2013).

This post written by Abigail Kortz.

See our disclaimer.