Florida is consulting with the industry on regulations aimed at relaxing the collateral requirements for foreign reinsurers operating in the Sunshine State. This follows the announcement in October that New York was also revising its rules.
In a bid to attract new capacity into the region, the Florida Office of Insurance Regulation (OIR) has unveiled plans to give credit to companies with the strongest credit rating. This means that companies with a double A rating from two or more rating firms would receive 100% credit, with the requirement reducing on a sliding scale based on ratings.
Under current law, US-licensed and Florida-accredited reinsurers do not have to post collateral but foreign, or ‘alien’ reinsurers as they have been dubbed are required to post collateral to the full amount of their liabilities.
“This collateral requirement is a barrier to investment by foreign reinsurers in the Florida market,” said the OIR.
The proposals are good news for Lloyd’s. Commenting on the decision, Lloyd's Director & General Counsel Sean McGovern, said: "We are pleased that Florida has decided to revisit the rules regarding collateralisation. We believe that this is a significant step towards US and non-US reinsurers being treated equally. This must continue to be the goal.”
The Florida OIR held a workshop last month to seek public input on a draft rule that would implement new legislation giving the insurance commissioner discretion in allowing unaccredited reinsurance companies to conduct business in Florida without having to post 100% collateral. Earlier this year, the Florida Legislature passed a law that gives the insurance commissioner the ability to establish lower collateral requirements for foreign reinsurers that are highly rated and financially sound.
"Allowing foreign reinsurers to conduct business with Florida insurers without requiring them to post millions of dollars in collateral will lead to increased capital and competition in our state," said Commissioner Kevin McCarty in a statement last month. "These factors will help to stabilize and potentially reduce property insurance rates."
