In the first quarter of 2012, a number of state legislatures introduced bills proposing to amend state credit for reinsurance laws following, in large measure, the recently amended NAIC Model Law #785. Connecticut (HB 5484), Georgia (SB 385), Illinois (HB 3987 & SB 2864), Louisiana (HB 849), Missouri (HB 1936), and Virginia (HB 1139) all proposed legislation that would, among other changes, allow full credit to insurers for insurance ceded to unauthorized reinsurers that satisfy certain financial strength ratings, without the need to post full collateral. Following the amended NAIC Model Law, each of the bills also contains provisions increasing oversight of the nature and extent of risk ceded by domestic insurers. Only the Virginia bill, however, included a provision based on a section in the Model Law clarifying that the reduced collateral provisions do not have retroactive application.
On a related note, the New Jersey Department of Banking and Insurance proposed new rules and amendments (NJAC 11:2-28.4) to implement the previously enacted credit for reinsurance law in that state. In particular, the rules provide the standards by which a reinsurer may be deemed a “certified reinsurer” for purposes of insurers taking credit for reinsurance, tracking the amendments NAIC Model Regulation #786. The proposed rules also include provisions from the amended Model Law that had not previously been incorporated into the New Jersey law.
As to the current status of the bills, the Virginia bill passed both chambers and was signed into law on April 4, 2012. All other bills are at varying stages in the legislative process, with the Georgia bill farthest along, having been passed by both chambers and sent on April 5, 2012 for the Georgia governor’s signature. We will report on whether the still-pending bills and rules become law in a later post.