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Reinsurance Transactions

CONNECTICUT INSURANCE DEPARTMENT AMENDS CREDIT FOR REINSURANCE REPORTING REQUIREMENTS

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Effective October 1, 2012, the Connecticut Insurance Department has amended its Credit for Reinsurance law to align with the November 2011 amendments to the NAIC Credit for Reinsurance Model Law. The amendments to Connecticut’s law adopt the NAIC Model Law’s reporting requirements, which require a domestic ceding insurer to notify the Insurance Commissioner when reinsurance recoverables and amounts ceded to a single assuming insurer exceed certain thresholds. State of Conn. Ins. Dep’t, Credit for Reinsurance Reporting Requirements, Bulletin No. FS-24 (Dec. 3, 2012).

This post written by Abigail Kortz.

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NAIC REINSURANCE TASK FORCE DECEMBER 2012 MEETING

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On December 1, 2012, the NAIC’s Reinsurance (E) Task Force convened at the 2012 NAIC Fall Meeting to discuss the status of several regulatory issues. The NAIC staff reported that 11 states have adopted some form of the NAIC Model Credit for Reinsurance Law and Regulation, which allows for reduced collateral requirements for certified reinsurers. The Model Law and Regulation were approved at the Fall Meeting as optional standards, meaning states may continue to require 100% collateral. The Task Force also exposed its Draft NAIC Process for Developing and Maintaining the List of Qualified Jurisdictions for a 45-day comment period and noted that 4 jurisdictions, Bermuda, Germany, Switzerland and the UK, will receive expedited review. Another discussion focused on a survey of states regarding the Dodd-Frank’s Nonadmitted and Reinsurance Reform Act, which brought to light concerns about how to treat reinsurers that have large segments of insurance business for purposes of solvency regulation.

This post written by Abigail Kortz.

See our disclaimer.

COMMENT PERIOD OPEN FOR PROPOSED AMENDMENTS TO NEW YORK’S CREDIT FOR REINSURANCE REGULATIONS

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On November 28, 2012, the New York Department of Financial Services published a notice of proposed rulemaking (with no hearing scheduled) regarding the Credit for Reinsurance regulations to more closely align its program with the recently amended NAIC Credit for Reinsurance Model Law and Regulations. The revisions to New York’s regulations are substantially similar to Section 8 of the Model Regulations, but also require reinsurance contracts to include terms regarding venue and choice of law. Section 8 and New York’s proposed amendment set forth the rating schedule used to determine reduced collateral requirements for reinsurers domiciled outside of the U.S. As previously reported by Carlton Fields LLP, the NAIC amended the Model Law and Regulations in November 2011 to add Section 8 and New York promulgated its Credit for Reinsurance regulations in November 2010 when it became only the second state to adopt a ratings-based framework. The comment period for the proposed amendments to New York’s Credit for Reinsurance regulations ends on January 12, 2013. N.Y. Comp. Codes R. & Regs. tit. 11, § 125 (proposed Nov. 28, 2012).

This post written by Abigail Kortz.

See our disclaimer.

SPECIAL FOCUS: NAIC FOCUSES ON CAPTIVES AND SPVS

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The NAIC has had a special sub-group reviewing the regulation and use of captive insurers and special purpose vehicles. John Pitblado reports in a Special Focus article on the scope and development of this review.

This post written by John Pitblado.

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CALIFORNIA ENACTS NAIC CREDIT FOR REINSURANCE AND HOLDING COMPANY MODEL LAWS

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On September 7, 2012, the governor of California signed into law two bills implementing amendments to the NAIC Credit for Reinsurance Model Law and NAIC Insurance Holding Company System Regulatory Model Act. The former, SB 1216, allows full credit to insurers for insurance ceded to unauthorized reinsurers that satisfy certain financial strength ratings, without the need to post full collateral. It also contains provisions increasing oversight of the nature and extent of risk ceded by domestic insurers. The California law differs from the NAIC Model, however, by authorizing the insurance commissioner to disallow credit for reinsurance under certain circumstances, notwithstanding technical compliance with the new requirements.

The second bill, SB 1448, increases oversight over an insurer’s holding company system, specifically over “enterprise risk” defined as “any activity, circumstance, or event or series of events involving one or more affiliates of an insurer that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole.” The law requires, among other things, the filing of annual enterprise risk reports, and a statement that the insurer’s board of directors is responsible for overseeing corporate governance and internal controls, and that the insurer’s officers or senior management have approved, implemented, and continue to maintain and monitor corporate governance and internal control procedures. The law also authorizes the commissioner to establish and participate in a supervisory college to determine compliance for insurance holding company systems with international operations.

Both laws go into effect January 1, 2013. The credit for reinsurance law, however, will be deemed automatically repealed on January 1, 2016, unless separate legislation provides otherwise.

This post written by Michael Wolgin.

See our disclaimer.