Reform of reinsurance collateral requirements in the US continues to progress. Florida, Indiana, New Jersey and New York already allow unauthorized reinsurers to qualify for posting less than 100% collateral depending on their financial strength ratings as well as other factors. Other states, including Illinois, Louisiana and Texas, are considering bills that will provide for similar reductions in reinsurance collateral requirements based on ratings. The states with pending legislation will likely see primary activity on such bills in 2012. Other states are expected to consider similar legislation in the near future. States have been prompted to enact reinsurance collateral reduction measures due to, in part, the proposed amendments to the National Association of Insurance Commissioners (“NAIC”) Credit for Reinsurance Model Law (#785) and Credit for Reinsurance Model Regulation (#786). The proposed amendments to the NAIC models allow for ratings-based reinsurance collateral reductions and will set a floor for collateral requirements that many states may follow. For more information on proposed amendments to the NAIC models, please see the below article, NAIC Reinsurance (E) Task Force Continues to Take Steps to Amend Credit for Reinsurance Model Law and Regulation.
We have prepared the following “tracking chart” regarding reinsurance collateral developments in the states to-date, including links to the relevant approved or pending statutes and/or regulations, summary of requirements for reinsurers to qualify for posting less than 100% collateral, effective dates for the changes and other relevant information. The chart can be accessed here. As other states adopt changes, we will update our chart in future monthly bulletins.