A US District Court has confirmed an arbitration award entered in an NASD arbitration in unusual circumstances: Petitioner failed to present any evidence in an attempt to force a postponement of the final hearing. The Panel denied the request for a postponement, at which time counsel for Petitioner left the hearing. The Panel reconvened the next day to permit Petitioner to offer evidence, which it failed to do. The Panel later dismissed the claims for lack of evidence. The Court found that Petitioner's failure to proceed was not misconduct by the Panel. Kober v. Kelly, Case No. 06-3341 (USDC S.D.N.Y. July 18, 2006).
Legislation potentially affecting reinsurers proceeds in US and UK
The implementation of legislation regulating the reinsurance industry is proceeding in the UK, while federal regulatory legislation is under consideration in the US Congress. In the UK, the Financial Services Authority has issued a consultation paper titled Implementing the Reinsurance Directive, which describes the European Union's Reinsurance Directive and the FSA's implementation initiatives. The Reinsurance Directive is intended to create a single European market in reinsurance and remove remaining barriers to trade within the EU arising from varied supervisory regimes.
In the US, the Nonadmitted and Reinsurance Reform Act of 2006 is pending in the House. This bill, if enacted, would pre-empt state laws and attempt to create uniformity in the regulation of reinsurance, and would grant a reinsurer's domiciliary regulator the sole responsibility for regulating the financial solvency of the reinsurer if such state is an NAIC accredited state.
Tokio Marine places securitization of typhoon risks
Tokio Marine & Nichido Fire Insurance Co. has arranged reinsurance cover for approximately $200 million of typhoon risks by means of a securitization. Swiss Re accepted reinsurance of the risks and transferred the risks to a special purpose Cayman Islands company which issued the securities. The five year, BB+ rated securities transaction was designed and sold with the assistance of SwissRe Capital Markets Corporation.
UK – Reinsurance broker not entitled to double brokerage
The UK Court of Appeal has held that a reinsurance broker was not entitled to receive brokerage on both a deposit premium and on the total adjusted premium (without deduction of the deposit premium). This was a question of the interpretation of four excess of loss reinsurance contracts and seven burning cost contracts. Absalom v. TCRU Ltd., [2005] EWCA Civ 1586 (December 19, 2005).
Arbitration award confirmed over objection of regulator
In Koken v. Cologne Reinsurance (Barbados) Ltd., Case No. 98-0678 (USDC M.D. Pa. Aug. 23, 2006), a District Court reaffirmed its earlier decision that an arbitration provision was binding upon the Insurance Commissioner of Pennsylvania, acting as the liquidator of American Integrity Insurance Company, rejecting an argument based upon the McCarran-Ferguson Act. The Court declined to vacate the majority of the award under the manifest disregard of law standard, holding that “an erroneous interpretation by the arbitration panel does not warrant a finding of manifest disregard,” but vacated one paragraph of the award as being in manifest disregard of law, becuase it continued an insurance coverage past the time provided for by an unambiguous Pennsylvania statute.