- National Association of Insurance Commissioners (NAIC) Adopts Process for Developing and Maintaining List of Qualified Jurisdictions for Reinsurance Collateral Reduction Purposes
- August 28, 2013
- Law Firm: Colodny Fass Talenfeld Karlinsky Abate Webb P.A. - Fort Lauderdale Office
The National Association of Insurance Commissioners ("NAIC") announced today, August 27, 2013, that it has adopted the Process for Developing and Maintaining the NAIC List of Qualified Jurisdictions ("Process"), which evaluates the reinsurance supervisory systems of non-U.S. jurisdictions for reinsurance collateral reduction purposes.
The Process, which received minor revisions just before its approval by the NAIC Executive/Plenary at its meeting today during this weekend's Summer 2013 National Meeting, had been edited to reflect concerns in submitted comments including: 1) confidentiality issues regarding the exchange of information between jurisdictions under review and the NAIC/states; 2) communication with the Federal Insurance Office ("FIO") and other federal authorities; 3) clarification that information regarding a jurisdiction under review may also be provided by its domestic reinsurers; and 4) the time period that will be reviewed with respect to the historical performance of reinsurers domiciled in a jurisdiction under review.
Pennsylvania Insurance Commissioner Michael Consedine, who chairs the NAIC's Reinsurance Task Force, summarized the changes relating to confidentiality and information-sharing, specifically noting the following: 1) the NAIC does not contemplate reviewing confidential company-specific information in the Process, and has focused the entirety of this approval procedure on reviewing publicly available information; 2) if confidential company-specific information is provided to the NAIC during the process, it will only be provided under a confidentiality agreement entered into between the jurisdiction and the NAIC or the states, as appropriate; and 3) if no agreement is executed or the jurisdiction is unable to enter into such an agreement, then the NAIC will not accept any confidential company-specific information.
2011 revisions to the NAIC's Credit for Reinsurance Model Law and Regulation require an assuming insurer to be licensed and domiciled in a qualified jurisdiction in order to be eligible for certification by a state as a certified reinsurer. The Reinsurance Task Force been charged with developing a list of jurisdictions recommended for recognition by the states as qualified jurisdictions. Under the Model Law, states must consider this list when approving qualified jurisdictions.
"The reduction of reinsurance collateral requirements has been a priority for the NAIC and the states for more than a decade, and the adoption of this process brings us closer to achieving this goal," said NAIC President and Louisiana Insurance Commissioner Jim Donelon. "As one of the states that have adopted reinsurance collateral reform, we look forward to starting the review process and beginning to certify reinsurers from qualified jurisdictions."
According to the NAIC, the next step will be to begin the expedited review of the four jurisdictions that have previously been approved by individual states: Bermuda, Germany, Switzerland and the United Kingdom.
"We hope to have these jurisdictions approved as conditional qualified jurisdictions before the end of the year," said Commissioner Consedine. "We look forward to working with regulators from these jurisdictions, as well as the FIO and other federal authorities interested in this process."
Currently, 18 states have adopted the revisions to allow for collateral reduction. Insurers domiciled in these 18 states write approximately 53 percent of the primary insurance premium in the U.S. A number of additional states are currently considering similar proposals.