New Jersey’s governor signed that state’s Reinsurance and Surplus Lines Stimulus and Enhancement Act (A-2670/S-2010) into law this past Tuesday, March 22 (N.J. Pub. L. 2011, c. 39). The law permits regulators to reduce the amount of collateral that alien reinsurers must post, and follows similar legislative activity in New York and Florida. A copy of the enrolled act is available here.
Instead of requiring alien reinsurers to post 100% collateral, non-US reinsurers can take advantage of significantly lower collateral levels that will be promulgated by the New Jersey commissioner of banking and insurance. The act vests that official with discretion to allow credit for reinsurance if the reinsurance is ceded to an assuming insurer that meets certain financial and regulatory criteria. The legislation itself merely sets forth the framework, leaving most of the detail to administrative rulemaking that has not yet begun.
New Jersey’s move follows the adoption of similar rules elsewhere, in New York and Florida. New Jersey’s move marks a change in the regulatory landscape. Traditionally, alien reinsurers have been required to post 100% collateral, while domestic reinsurers have not been required to post any. We will continue to monitor developments and will post them on this blog as they happen.