In a letter dated May 19, 2014, the Captive Insurance Companies Association (CICA) urged the National Association of Insurance Commissioners (NAIC) to reject proposed revisions to the definition of “multi-state reinsurer” in the Part A and Part B preambles of the standards for state accreditation. According to the CICA, the proposed new definition is overly broad and would bring a new regulatory burden for numerous alternative risk structures that have nothing to do with problem that is sought to be addressed by the change, i.e., the utilization of special purpose vehicles and captives as reinsurance mechanisms by life and annuity insurers regarding excess reserves. The CICA argues that the proposed definition would subject most captive reinsurers (including reinsurers in the property/casualty industry) to NAIC accreditation standards, and that there is no evidence that captives need this additional regulatory burden. The CICA argues that if the NAIC is concerned with the life and annuity reinsurance provided by the captive subsidiaries of large commercial insurers that may present “systemic risk” to the global financial system, then the definition should be properly tailored so as to avoid application for the thousands of captives that are not in this category.
Previously, the preamble had excluded “insurers that are licensed, accredited or operating in only their state of domicile but assuming business from insurers writing that business that is directly written in a different state.” The proposed revised definition removes that exclusion, defining a multi-state reinsurer as “an insurer assuming business that is directly written in more than one state and/or in any state other than its state of domicile. This includes but is not limited to captive insurers, special purpose vehicles and other entities assuming business.”