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Reinsurance Transactions

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.

See our disclaimer.

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.

CFPB ENTERS INTO SETTLEMENT PROHIBITING CAPTIVE MORTGAGE REINSURANCE

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The Consumer Financial Protection Bureau (“CFPB”) recently filed complaints in the Southern District of Florida against Genworth Mortgage Insurance Corporation, Mortgage Guaranty Insurance Corporation, Radian Guaranty Inc., and United Guaranty Corporation alleging violations of the Real Estate Settlement Procedures Act (“RESPA”) by engaging in the practice of paying kickbacks to captive reinsurance affiliates of mortgage lenders in exchange for referrals. All four mortgage insurers have agreed to consent orders, which inter alia (1) prohibit them from entering into any new captive mortgage reinsurance arrangements for a period of ten years, regardless of whether the arrangement includes any payments that might be interpreted as kickbacks, (2) prohibit them from accessing funds held in trust related to existing reinsurance arrangements other than for the reimbursement of reinsurance claims, (3) impose a civil penalty ranging from $2.6 to $4.5 million each, and (4) require them to submit to compliance monitoring and reporting to the CFPB. The fact that these settlements prohibit any captive reinsurance agreements for ten years, whether or not a “kickback” payment was involved, seems to overreach the allegations of the Complaints. See, e.g., CFPB v. Radian Guaranty Inc., Case No. 13-21188 (S.D. Fla. Apr. 9, 2013) (Order granting motion to approve consent judgment and Complaint).

This post written by Abigail Kortz.

See our disclaimer.

SPECIAL FOCUS: RECENT DEVELOPMENTS IN THE CAT BOND AND REINSURANCE MARKETS

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There has been significant development in both the cat bond and traditional reinsurance markets so far in 2013, with the emergence of competition between the markets, new bond terms, a cash influx into the reinsurance sector, a re-examination of business strategies and pricing reductions in both markets. Reinsurance Focus Blogmaster Rollie Goss, who has been representing ceding insurers in both cat bond and traditional reinsurance transactions, analyzes these developments in a Special Focus article titled The Developing Relationship Between the Catastrophe Bond and Traditional Reinsurance Markets.

This post written by Rollie Goss.

See our disclaimer.

EMERGING CAT RISK TRANSFER STRATEGIES

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There are two new strategies being considered for catastrophe risk transfers. First, H.R. 1101, recently introduced in the House of Representatives, provides for a pre-funded public-private cat risk insurance “backstop” through privately funded reinsurance through state approved plans. The bill includes requirements for reinsurance coverages to be provided by the program. The goals of this program include the stabilization of the cat risk reinsurance market, the expansion of market capacity and the reduction of the dependence on the federal government for funding for responding to disasters.

Second, five Pacific island nations, Marshall Islands, Samoa, Solomon Islands, Tonga and Vanuatu have become members of the Pacific Catastrophe Risk Insurance Pilot. Sponsored by the World Bank, with funding from Japan, the two year pilot program features cat risk modeling by AIR and parametric trigger coverage from four insurance companies, Swiss Re, Mitsui Sumitomo Insurance, Sompo Japan and Tokio Marine Nichido. The objective of the program appears to be to assess whether catastrophe insurance for hurricane, earthquake and tsunami risks might be workable feasible to provide immediate post-event liquidity to member countries. Although details are not presently available, this pilot may envision a program similar to that of the Caribbean Catastrophe Risk Insurance Facility.

This post written by Rollie Goss.

See our disclaimer.