In November 2011, the NAIC Executive Committee charged the Financial Condition (E) Committee with studying insurers’ use of captives and special purpose vehicles to transfer third-party insurance risk in relation to existing state laws and regulations and establish regulatory requirements, including revising or creating NAIC model laws, to address concerns identified in the study. To that end, the Financial Condition (E) Committee created the “Captives & SPV Use Subgroup” with representatives from the Financial Analysis (E) Working Group, the Life Actuarial (A) Task Force, and the Reinsurance (E) Task Force. The Subgroup held its inaugural conference call on January 27, 2012, in which it issued a survey to state insurance regulators with respect to commercial insurers domiciled in their respective states that transfer risk to captives or SPVs. The survey sought comment on various issues, including the basics of each state’s laws impacting captives or SPVs, the types of products permitted to be transferred, the business purpose behind such transfers, solvency standards, credit for reinsurance, and other topics designed to provide perspective on the general legal and business environment surrounding the use of captives and SPVs. Thirty-one states responded to the survey by the February 20, 2012 deadline, and the results were discussed at the NAIC Spring National Meeting held in early March. The Subgroup plans on developing another survey targeted to companies, the results of which will be kept confidential with the exception of an aggregate summary that will be circulated for comment. Conference calls are scheduled every two-to-three weeks going forward through the Summer National Meeting in August 2012, with the goal of drafting a proposal or a white paper addressing the Subgroup’s charge. This group has a web page on the NAIC’s internet site.
This post written by Michael Wolgin.
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