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Accounting for Reinsurance

IOWA AND MARYLAND ADOPT ACTS CONCERNING CREDIT FOR REINSURANCE

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On April 24, 2013, the Iowa State Senate adopted a Credit for Reinsurance Act that becomes effective January 1, 2014. On March 20, 2013, the Maryland State Senate adopted Senate Bill 777, an Act concerning “Insurance – Ceding Insurers and Reinsurance,” which takes effect June 1, 2013. The language of both Acts closely tracks that of the NAIC Credit for Reinsurance Model Law, which allows a ceding insurer to receive a credit for reinsurance when insurance is ceded to a reinsurer that meets certain requirements. Senate File 182, 85th Gen. Assembly (IA Apr. 24, 2013); Senate Bill 777, Gen. Assembly (MD 2013). A staff summary provides an analysis of the Maryland act.

This post written by Abigail Kortz.

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CONNECTICUT INSURANCE DEPARTMENT ISSUES PRACTICAL GUIDANCE REGARDING ITS CREDIT FOR REINSURANCE LAW

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As previously reported on this blog, the Connecticut Insurance Department amended its Credit for Reinsurance law to align with the NAIC Credit for Reinsurance Model Law with an effective date of October 1, 2012. On March 1, 2013, the Department issued a bulletin which provides practical guidance to insurers seeking to become credited reinsurers in Connecticut. The bulletin sets forth the requirements for certification eligibility and includes a checklist addressing those requirements, which must be submitted along with the application for certification. State of Conn. Ins. Dep’t., Requirements to Become a Connecticut Certified Reinsurer, Bulletin No. FS-25 (Mar. 1, 2013).

This post written by Abigail Kortz.

See our disclaimer.

NEW YORK AND MISSOURI AMEND THEIR CREDIT FOR REINSURANCE REGULATIONS

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As previously reported by Carlton Fields, LLP, the New York Department of Financial Services published a notice of proposed rulemaking regarding changes to New York’s Credit for Reinsurance regulations in November 2012. The proposed changes were published and took effect on March 20, 2013. Missouri also recently introduced a bill that will change its credit for reinsurance regulations effective January 1, 2014. The changes authorize a reduction in the required statutory trusteed surplus for reinsurers who discontinue underwriting new business for at least three years, provides credit for reinsurance ceded to credited insurers and eligibility requirements for certification, and requires ceding insurers to take steps to diversify their reinsurance programs. Both the New York and Missouri amendments are based upon the NAIC Credit for Reinsurance Model Law and Regulations. N.Y. Comp. Codes R. & Regs. tit. 11, § 125 (2013); S.B. 60, 97th Gen. Assemb., Reg. Sess. (Mo. 2013).

This post written by Abigail Kortz.

See our disclaimer.

NEW YORK AG LACKS STANDING TO OBJECT TO PROPOSED SETTLEMENT IN AIG SECURITIES LITIGATION

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In a case that has been litigated since 2004, and on which we have frequently reported, the New York Attorney General (“NYAG”) has attempted to block progress toward resolution by filing an objection to the pending settlement between class plaintiffs and a group of defendants. The NYAG asserts that the settlement is “unfair and inadequate” because it does not take into account an allegedly fraudulent finite reinsurance transaction between AIG and General Reinsurance Corp. The court found that the NYAG lacks standing to object, both under the Class Action Fairness Act and constitutional standing requirements, and denied the NYAG’s request for intervention taking into consideration the interest of the settlement class to resolve the matter without further delay. The court did, however, entertain the NYAG’s concerns about misrepresentations in the Class Notice regarding findings from the plaintiffs’ loss causation expert and ordered a Supplemental Notice to be sent out, which includes an additional opportunity to opt out of the settlement class. The Fairness Hearing for the proposed settlement is set for April 10, 2013. In re American International Group, Inc. Securities Litigation, Case No. 04-cv-8141 (USDC S.D.N.Y. Jan. 7, 2013).

This post written by Abigail Kortz.

See our disclaimer.

UPDATE ON CAPTIVE INQUIRIES

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We have previously posted on the NAIC’s pending inquiries into the appropriateness of the use of captives. There are two recent developments of note with respect to such issues. First, the NAIC’s subgroup which has been conducting an inquiry has exposed for public comment a revised version of its white paper titled Captives and Special Purpose Vehicles. This draft does not resolve all of the disagreements evident in prior discussions of these issues at the NAIC, calling for further study with respect to some issues. The comment period for this document ends April 29, 2013. Second, the Treasury’s Federal Insurance Office (“FIO”) has formed a task force, headed by District of Columbia Insurance Commissioner William White, to examine the national implications of the use or possible abuse of captives and special purpose vehicles by life insurance companies. This represents a new direction for the FIO, and the reason for this shift is not readily apparent. Although the FIO has been involved mostly in international issues so far, and the NAIC white paper does identify its inability to regulate offshort capitves as an issue, it is unclear whether the FIO’s interest has been prompted by international regulatory concerns.

This post written by Rollie Goss.

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