The NAIC adopted the revised Credit for Reinsurance Model Law (#785) and Credit for Reinsurance Model Regulation (#786) in November 2011. By September of this year, 11 states had implemented changes to their credit for reinsurance requirements to allow for a ratings-based methodology providing for reduced collateral requirements for certified, non-U.S. reinsurers. These states include: Florida, New York, New Jersey, Pennsylvania, California, Connecticut, Delaware, Georgia, Indiana, Louisiana, and Virginia. Certain of these states, most notably Florida and New York, already had moved in this direction before the NAIC adopted its revised Models, but a number enacted legislation during their recently completed legislative sessions.
Some of the state legislation has included variation from the NAIC Models. For example, California’s law, signed by Governor Brown in early September, authorizes the insurance commissioner to disallow credit for reinsurance under certain circumstances notwithstanding technical compliance with the new requirements. This law goes into effect January 1, 2013, but will be deemed automatically repealed on January 1, 2016, unless separate legislation provides otherwise. Thus, it appears that California may be taking the NAIC’s revised Model on a three-year test drive.
At the NAIC, the Reinsurance (E) Task Force continues its work on credit for reinsurance matters. Most notably, its Qualified Jurisdiction Drafting Group, led by Missouri’s Director John Huff, is focusing on developing the list of qualified jurisdictions. Under the Models, this list will identify the non-U.S. jurisdictions qualifying as acceptable domiciliary jurisdictions for non- U.S. reinsurers to be eligible for consideration for certification and, potentially, reduced collateral obligations. An extensive summary and analysis of the NAIC’s revised Models can be found in a Special Focus article at ReinsuranceFocus.com.