Current position and next steps

Just days before the NAIC 2007 Spring meeting, the agenda of the Reinsurance Task Forces (RTF) was refined through the issuing of two new Charges.

The first Charge instructs the RTF to develop a risk based evaluation process for purposes of collateral recalibration as part of implementation of the ‘Reinsurance Evaluation Office’ (REO) proposal. The second Charge is considerably broader, requesting the RITF to “consider the design of a revised U.S. reinsurance regulatory framework”. A full status report of the first Charge is expected in June, working towards a September completion. A full status report on the second charge is not expected before the end of the year.

This followed on from the December meeting that saw the advancement of the REO proposal into a risk based evaluation process. The initial REO Proposal was the output from the sub-group of regulators led by former commissioner Julie Bowler of Massachusetts. It responded to the Charge in March 2006 from the NAIC membership “to consider alternatives to the current regulatory framework for credit for reinsurance”. However, whilst this Charge went on to state that consideration should be given to the reinsurer’s financial strength regardless of domicile, the December REO proposal only does this in the case of US reinsurers.

The Lloyd’s team will therefore increase its lobbying efforts to convince regulators that strong alien reinsurers should be treated on the same basis as strong US
reinsurers, which under the REO proposal, strong US reinsurers, which under the REO proposal will not have to post any collateral (the final REO proposal is available from the NAIC website).

The debate is now entering a new phase, with many new insurance commissioners becoming involved. This includes a change in the NAIC leadership as Commissioner Walter Bell, (Alabama) takes over as NAIC President from Commissioner Al Iuppa, (Maine), who has been a strong supporter of reinsurance reforms. Commissioner Oxendine (Georgia) as chair of the RITF is also playing an increasingly important role.

The International Issues Committee of the National Conference of Insurance Legislators (NCOIL) has already approved an amendment to the Credit for Reinsurance Model Regulation, to establish a framework for an approved list of reinsurers with a criteria established by US regulators.

NCOIL’s Executive Committee has held two debates on whether to approve the proposed reform and has sent its findings to the state legislators for consideration. They are expected to consider the issue again at the present time are expected to continue closely monitor progress at the NAIC.

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Last updated on 17 Apr 2007