Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

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Week's Best Posts

CREDIT FOR REINSURANCE ISSUES TAKING NEW TURNS?

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We have posted many times on the slowly developing changes in the area of credit for reinsurance and reinsurance collateral requirements. The recent report on insurance regulation from the Federal Insurance Office contained a recommendation in this area: “To afford nationally uniform treatment of reinsurers, FIO recommends that Treasury and the United States Trade Representative (USTR) pursue a covered agreement for reinsurance collateral requirements based on the National Association of Insurance Commissioners Credit for Reinsurance Model Law and Regulation.” FIO Report, page 37. Such an agreement likely would be an international agreement which, pursuant to the Dodd-Frank Act, would preempt and supersede state laws in this area.

At the same time, the NAIC has been monitoring the adoption by the states of the Credit for Reinsurance Model, and has pursued a process of certifying foreign jurisdictions as “qualified jurisdictions” for purposes of of permitting reinsurers licensed or domiciled in such jurisdictions to seek certification by states for reduced collateral requirements under the Credit for Reinsurance Model. The NAIC has announced the addition of four international supervisory authorities as Conditional Qualified Jurisdictions: the Bermuda Monetary Authority; the German Federal Financial Supervisory Authority; the Swiss Financial Market Supervisory Authority; and the United Kingdom Prudential Regulation Authority of the Bank of England. According to the NAIC article, this approval permits states to begin certifying reinsurers licensed or domiciled in those jurisdictions for collateral reduction purposes, with the full review of these four jurisdictions by the NAIC continuing during 2014. Individual states have the authority to approve jurisdictions not on the NAIC’s list of qualified jurisdictions. Since the NAIC/Model approach depends upon action by individual states, this route is unlikely to achieve the uniformity advocated by the FIO Report, at least in the short term.

This post written by Rollie Goss.

See our disclaimer.

THE EFFECT AND FATE OF THE ACA’S TRANSITIONAL REINSURANCE PROGRAM IS UNCLEAR

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On November 19, Senator Thune of South Dakota introduced S. 1724, the “Union Tax Fairness Act,” which proposes to provide that the reinsurance fee to be paid by health insurers and third-party administrators (on behalf of group plans) under the transitional reinsurance program of the Patient Protection and Affordable Care Act (“ACA”) be applied equally to all such issuers and administrators so that no special exemptions are available. This requirement would not be waivable. The bill (which can be read here) has been referred to the Committee on Health, Education, Labor, and Pensions. A companion house bill, H.R. 3755, was introduced by Congressman Perry of Pennsylvania on December 12 and has been referred to the House Committee on Energy and Commerce.

In other ACA reinsurance-related legislative activity, Congressman Tiberi of Ohio introduced on November 13 H.R. 3489, a bill to amend Section 1341 of the ACA to repeal entirely the funding mechanism for the transitional reinsurance program. The bill (which can be read here) reminds that the transitional reinsurance program was established to stabilize risk in the individual health insurance market during the first three years of the health insurance exchanges established by the ACA, but it then emphasizes (1) that the reinsurance fees to be paid to the U.S. Treasury serve as a disincentive for employers to continue offering coverage to all employees and (2) that employers do not receive any benefits of the program. That bill has been referred to the House Subcommittee on Health.

This post written by Kyle Whitehead.

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SPECIAL FOCUS: AN UPDATE ON CLASS ARBITRATION WAIVERS

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There has been a great deal of litigation over the past couple of years regarding the validity of class action arbitration waivers. In a Special Focus article, Re-Revisiting AT&T v. Concepcion: Yes, We Hear You Now (Mostly), John Pitblado provides an update on some of the most recent appellate cases in this area.

This post written by John Pitblado.

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COURT AGREES TO PERMANENTLY SEAL CONFIDENTIAL PORTIONS OF MEMORANDA AND DEPOSITION TESTIMONY IN REINSURANCE DISPUTE

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In a reinsurance dispute, a court agreed to seal portions of two memoranda of law and exhibits containing excerpts of deposition testimony of the reinsurer’s vice president. The court had previously provisionally sealed the material pursuant to the parties’ stipulated protective order, subject to the reinsurer’s submission of the particular lines and/or passages of testimony to be sealed and the particular grounds for such sealing. After the reinsurer submitted this information, the court agreed to maintain the sealing. Regarding the relevant portions of the memoranda, the court found that they contain confidential business information, and that sealing was appropriate in light of the fact that the cedent had also filed redacted versions of both documents. The court also agreed to permanently seal the deposition excerpts because the court found that they “contain sensitive and confidential business information, disclosure of which could materially affect [the reinsurer’s] ability to compete effectively as a business,” and because the request was narrowly tailored. Travelers Indemnity Co. v. Excalibur Reinsurance Corp., Case No. 3:11-cv-1209 (USDC D. Conn. Nov. 26, 2013).

This post written by Michael Wolgin.

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FIO FINALLY ISSUES INSURANCE REGULATION REPORT

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The Federal Insurance Office has finally issued the report required by the Dodd-Frank Act assessing the regulation of insurance in the United States. The report includes recommendations for the federal government to consider a limited role in helping to make the regulation of insurance more uniform. With respect to reinsurance, the report contains the following recommendations:

· States should develop a uniform and transparent solvency oversight regime for the transfer of risk to reinsurance captives (see page 32 of the report); and

· To afford nationally uniform treatment of reinsurers, FIO recommends that Treasury and the United States Trade Representative pursue a covered agreement for reinsurance collateral requirements based on the National Association of Insurance Commissioners Credit for Reinsurance Model Law and Regulation (see page 37 of the report). This would apparently be an international level agreement to introduce uniformity throughout the states, which under Dodd-Frank would pre-empt state laws.

This post written by Rollie Goss.

See our disclaimer.