The National Association of Insurance Commissioners (NAIC) has adopted its Reinsurance Regulatory Modernization Framework Proposal, which modernizes U.S. state-based regulation of reinsurance.

The “conceptual framework” would modify the 100 percent collateral requirements for foreign reinsurers. Dave Snyder, The American Insurance Association’s (AIA) vice president and assistant general counsel, said, “Against a backdrop of financial stresses in the economic system, it is impossible to justify shipping billions of dollars of security out of the U.S. without obtaining at least equal concessions that would benefit U.S. companies overseas.”

“We will fight this in the states and certainly at the federal level because we believe that this is not in the interests of the U.S,” he promised.

The proposal creates two new classes of reinsurers in the United States: U.S.-domiciled national reinsurers and non-U.S.-based port of entry (POE) reinsurers, and introduces modified collateral requirements for eligible reinsurers. The proposal also establishes a new framework for state-based reinsurance regulation based on the concepts of supervisory recognition, single-state licensure for U.S. reinsurers and single-state certification for non-U.S. reinsurers from approved jurisdictions.

The proposal creates the NAIC Reinsurance Supervision Review Department (RSRD), which will evaluate the reinsurance supervisory regimes of other countries and establish standards for a state to be certified to regulate reinsurance on a cross-border basis. The current NAIC Credit for Reinsurance Model Act remains in place for reinsurers that do not choose to become either national or POE reinsurers.

NAIC Approves ‘Framework’ to Revise Reinsurance Collateral (National Underwriter 12/8/08)

December 9, 2008