New Reinsurance Framework

Dec 12th, 07
NAIC Reinsurance Task Force Update

The NAIC’s Reinsurance Task Force and Financial Condition (E) Committee approved a “framework memorandum” at its quarterly meeting in Houston.  The memorandum is intended to address issues such as collateral for reinsurance receivables, “mutual recognition” of alien jurisdictions, and a single state U.S. regulator for both U.S.-domiciled and alien reinsurers.  Primary insurers are mostly concerned about the potential reduction of collateral for any balances resulting from reinsurance contracts with alien reinsurers.  Many trade associations are in favor of retaining the current full collateral requirement, but it appears the NAIC is feeling pressure to react to a perception that commerce is being restricted, despite the prominent position many alien reinsurers hold in the U.S. market.  After the major issues are discussed again later this December, the NAIC’s Executive/Plenary Committee will vote on approval of the memorandum.