Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

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Week's Best Posts

State legislative update

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Bills have been introduced in state legislatures with a wide variety of reinsurance-related topics:

  • cat reinsurance: Connecticut Bill No. 65 would establish a state catastrophe fund to offer reinsurance to the private market; Florida SB 2806 would provide additional reform in allowing the state to sell reinsurance in the state hurricane catastrophe fund;

  • cat funds: New York A 4011 would establish a state catastrophe fund;

  • captives: District of Columbia B16-0897 would authorize the use of special purpose financial captive insurance companies to facilitate risk securitization; Missouri HB 238 would add 50 sections to the state's captive insurance company act, including allowing the creation of special purpose life reinsurance companies (bill text; bill summary);

  • credit for reinsurance: New Hampshire new regulation Part Ins 601 would provide rules for allowing credit for reinsurance; and

  • health care reinsurance: Arkansas SB 769 would enact the Small Employer Health Reinsurance Program Act of 2007; South Dakota SB 129 would establish a state health reinsurance pool to spread the expenses of high-cost individuals.

Non-legislative reinsurance market developments

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Apart from legislative activity in the area of cat funds and cat risk reinsurance, there have been three recent items of interest with respect to alternative reinsurance arrangements:

  • Hanover Re, which has been very active in securitizing reinsurance risks, has securitized reinsurance recoverables valued at approximately $1 billion, to accelerate the cash flow in that area;
  • The World Bank has created a regional catastrophe risk insurance pool that is currently covering 18 Caribbean countries. Two press releases describe the pool and the initial funding for the pool, which will purchase reinsurance in the private market. A detailed report available at the World Bank's Internet site provides additional detail;
  • Guy Carpenter & Company and MMC Securities Corp. has issued a detailed report titled The Catastrophe Bond Market at Year-End 2006, providing an annual review of the catastrophe bond market and an update on bond transaction activity and market dynamics. It provides interesting descriptions of different kinds of alternative risk transfer mechanisms, such as catastrohe bonds, side cars, and extreme mortality transactions, with listings of transactions in each category.

U.S. COURT holds that it has jurisdiction to grant a prejudgment remedy relating to a foreign arbitration

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This case addresses the important and divisive issue of whether the Federal Arbitration Act and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards deprive a United States District Court court of jurisdiction to order injunctions and grant provisional remedies while an international arbitration is pending in London. Relying on precedent from the Second Circuit, a Connecticut District Court denied a motion to dismiss, holding that it has jurisdiction to entertain a motion for a prejudgment remedy by a party to an arbitration currently pending in London. However, it denied a motion requiring the immediate disclosure of assets. Bahrain Telecommunications v. DiscoveryTel, Inc., Case No. 3:05cv1957 (D. Ct. March 9, 2007)

NAIC Committee takes action on reinsurance collateral proposal

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The NAIC has issued a news release with respect to action taken today by the NAIC's Financial Condition (E) Committee at the NAIC's Spring National Meeting, which is currently underway in New York City. The news release reports that the Committee has directed the Reinsurance Task Force to continue to work on technical details within the Reinsurance Evaluation Office Proposal, and to consider the design of a revised US reinsurance regulatory framework. For details, see the news release on the NAIC's Internet site.