Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

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Reinsurance Transactions

NAIC COLLATERAL PROPOSALS ADVANCE

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The NAIC's Reinsurance Task Force's proposals for modernization of U.S. reinsurance regulation have advanced. At a December 2 meeting, the Task Force adopted the proposed reinsurance regulatory framework with some minor revisions and discussed the possibility of an interim meeting in late January 2008 to address various aspects of the proposal. The Financial Condition (E) Committee adopted the report of the Reinsurance Task Force, including the reinsurance framework proposal, at its December 4 meeting.

This post written by Rollie Goss.

FLORIDA PROPOSES NEW REINSURANCE CREDIT/COLLATERAL RULE

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The State of Florida has proposed a new rule permitting a ceding insurer to take credit, as an asset or deduction from reserves, for reinsurance ceded to an eligible reinsurer based not upon the posting of collateral, but rather upon the reinsurer holding surplus in excess of $100 million and a stand-alone financial strength rating from at least two rating agencies. The amount of the credit allowed varies depending upon the reinsurers' financial rating.

This post written by Rollie Goss.

NAIC REINSURANCE TASK FORCE ADVANCES COLLATERAL AND REINSURANCE REGULATION PROPOSAL

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The NAIC’s Reinsurance Task Force has advanced a proposal “to comprehensively modernize reinsurance regulation in the United States.” The proposal is outlined in a press release issued in conjunction with the recent meeting of the Annual Conference of the International Association of Insurance Supervisors. The proposal is in two parts: (1) NAIC Reinsurance Supervision Review Department; draft proposal to grant recognition of regulatory equivalence to non-U.S. insurance supervisors; and (2) Port of Entry State Criteria for Reinsures [sic] Supervised in Jurisdictions Approved by the NAIC Reinsurance Supervision Review Department and U.S. Licensed Reinsurers. Generally, the proposals provide for the regulation of US domiciled reinsurers through a single state, and the agreement to allow non-US domiciled reinsurers to be regulated in the United States through a single state “port of entry” if the foreign regulatory authorities provide a regulatory regime for the company that is functionally equivalent” to that in the United States The proposals also partially change the collateral requirements to a credit-based system, but do not by any means completely eliminate the collateral requirements. The NAIC has also posted on its website a PowerPoint presentation titled NAIC Reinsurance Collateral Update. The next step in this process is a meeting on November 7-8 in Atlanta in conjunction with the NAIC Financial Summit. Comments on the proposal are posted on the NAIC Reinsurance Task Force’s web site.

DISTRICT COURT QUASHES CRIMINAL SUBPOENAS ISSUED TO INSURANCE COMPANIES AND THEIR ATTORNEYS

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Last year, a federal grand jury in New Haven indicted four former senior executives of General Re Corporation and one former senior executive of AIG for their participation in a fraudulent scheme to manipulate AIG’s financial statements. Recently, three of the defendants issued multiple subpoenas to several insurance companies and their attorneys pursuant to Federal Rule of Criminal Procedure 17(c). The subpoenas were contested by both the government and the third party subpoena recipients.

Applying the legal standard set forth by the Supreme Court in U.S. v. Nixon, the district court concluded that the subpoenas were unenforceable because they sought materials outside the proper scope of Rule 17(c). Specifically, the materials sought by several of the subpoenas would only be useful as impeachment materials, and therefore failed Nixon’s admissibility requirement. Other subpoenas were to be found unenforceable because they failed Nixon’s relevancy requirement. United States of America v. Ferguson, Case No. 3:06cr137, (USDC D. Ct. Sept. 26, 2007).

REN RE REACHES PROPOSED SETTLEMENT OF SHAREHOLDER CLASS ACTION LAWSUIT

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Renaissance Re has reached a proposed settlement of a shareholder class action lawsuit arising out of alleged finite reinsurance transactions. The proposed settlement would result in a cash fund of $13.5 million against which claimants could submit claims. Class counsel filed a memorandum in support of preliminary approval of the proposed settlement and a supplemental memorandum. The court then entered a preliminary approval order, setting a fairness hearing for consideration of final approval of the proposed settlement on January 11, 2008. This proposed settlement is in addition to Ren Re's $15 million settlement with the SEC reported on in a February 16, 2007 post to this blog.