Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

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Reinsurance Transactions

NAIC SUMMER MEETINGS RESULT IN MINIMAL PROGRESS ON REINSURANCE ISSUES

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The NAIC held its Summer 2009 meetings in Minneapolis last week, and there was only very modest progress on reinsurance-related issues. The Reinsurance Task Force meeting summary relates the following items:

  • Guidance Memorandum regarding reinsurance collateral: The exposure draft of this Guidance Memorandum (see our April 13, 2009 post) was adopted, for distribution to all state insurance commissioners.

  • Reinsurance Regulatory Modernization Framework: There was further discussion of the implementation of this initiative. The exposed draft Congressional bill is on hold pending the receipt of a legal opinion from Sidley Austin, LLP on constitutional issues that have been raised about this initiative.

  • Nonadmitted and Reinsurance Reform Act: An update was received on the status of this Congressional session’s version of this bill (HR 2571) (see our June 9, 2009 legislative update post). This bill was referred to committee upon its filing, without any progress since that time.

  • Credit for Reinsurance Model Act: Comments were received on a proposed amendment to this Act, which would provide a commissioner the authority to lower the minimum trusted surplus requirement applicable to a multiple-beneficiary trust maintained by an assuming insurer in run-off. Staff was directed to initiate the process for consideration of this amendment, and an additional amendment related to the implementation of the Reinsurance Regulatory Modernization Framework.

  • International Association of Insurance Supervisors’ Reinsurance Subcommittee and Reinsurance Transparency Subgroup: An update on recent activity of this group was received.

This post written by Rollie Goss.

NEW SIDEBAR AREA REGARDING REINSURANCE MARKET

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Observant readers will have noticed a new addition to the right sidebar of Reinsurance Focus titled Reinsurance Market. In discussions with our clients, many have mentioned the higher reinsurance rates this season, and the particular difficulty in obtaining acceptably priced reinsurance for cat risks. Although the cat bond market basically dried up during the second half of 2008, early 2009 has seen a number of cat bonds successfully issued and sold, using a somewhat different model and cost structure than before. Since our tracking of how many readers view each of our posts reveals that a large number of our readers are interested in such topics, we have added this new area to provide links to publicly available studies and analysis of the reinsurance market and cat risk bond market. It is not our intention to provide “newsy” items in this area, but rather to bring to the attention of our readers particularly thoughtful reports and studies which might provide a basis for creative thinking to help get your company or clients through difficult times. Let us know what additional types of information might be useful to you.

This post written by Rollie Goss.

UPDATE ON ANALYSIS OF NAIC CONSIDERATION OF REINSURANCE REGULATORY MODERNIZATION AND COLLATERAL CHANGES

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On April 13, 2009 we posted about the actions of the NAIC, at its recent meetings, to move forward on the regulation of reinsurance, collateral for reinsurance agreements and the modification of credit for reinsurance rules. Our partner Tony Cicchetti has posted a more detailed analysis of the regulatory and collateral proposals on several occasions, and he has updated that analysis to provide a comprehensive view of these issues.

This post written by Tony Cicchetti.

NEW YORK DEPARTMENT OF INSURANCE PROPOSES MANDATORY CATASTROPHE RESERVES FOR P&C COMPANIES

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The New York Insurance Department has proposed Regulation 189 – Mandatory Catastrophe Reserves for Property/Casualty Insurance Companies. The rule proposal would require every authorized property/casualty insurer issuing a policy of insurance or contract of reinsurance covering losses resulting form a catastrophe to property located in New York, and receiving New York subject premiums, to establish a New York mandatory contingent catastrophe reserve, which shall only be used toward the payment of claims from qualifying losses. In developing this rule proposal, the Department reviewed the research of the NAIC – Catastrophe Insurance Working Group, Casualty Actuarial Society, and performed outreach to property/casualty insurers, consumer groups, and other interested parties. The Department has published the text of the proposed regulation, and the Notice of Proposed Rulemaking notes that comments will be accepted until 45 days after the publication of the Notice. The comment period closes May 26, 2009.

This post written by Karen Benson.

FURTHER DEVELOPMENTS IN STATE CAPITAL AND SURPLUS RELIEF FOR LIFE INSURERS

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We have been following requests for relief by life insurance companies with respect to capital and reserve requirements in the current difficult economic situation. Following the NAIC’s rejection of proposals by the ACLI, individual insurers began to apply for relief to their domiciliary regulators, and two more state departments have published positions with respect to such issues. The Delaware Insurance Department has adopted two regulations (1212 and 1215) by Emergency Orders, which address the valuation of life insurance policies and the recognition of preferred mortality tables for use in determining minimum reserve liabilities. The Illinois Division of Insurance has promulgated Company Bulletin 2009-02, which rejects blanket relief, but which states that the Division would consider relief on a company-by-company basis. Posted to the Division’s web site are letters to eight companies relating to such requests. The first such letter, approving a request from Allstate Life Insurance Company relating to the accounting and valuation methodology for market value adjusted annuities, may be viewed here.

Of more industry-wide interest, the NAIC has posted a detailed chart which purports to summarize various permitted and prescribed practices, taken from annual statements submitted by various companies.

This post written by Rollie Goss.