Earlier this week the commissioner (the “Commissioner”) of the Florida Office of Insurance Regulation (“FOIR”) announced that the FOIR entered into reduced collateral agreements with three alien reinsurers pursuant to Section 690-144.007 of the Florida Administrative Code (the “Rule”). Pursuant to the Rule, the Commissioner may establish lower collateral requirements for property and casualty reinsurers that are not licensed or accredited in Florida if such reinsurers have surplus in excess of $100 million and are rated as having “secure financial strength” by at least two of the major rating organizations.
Typically, a Florida-domiciled ceding insurer can not obtain credit for reinsurance unless the unlicensed and unaccredited property and casualty reinsurer maintained collateral for the amount of the reinsurer’s obligations. The Rule allows the Commissioner to approve collateral requirements of less than 100% reinsurers that are not licensed or accredited, anywhere from 0-100%, depending on the financial strength of such reinsurer.
The Rule was enacted on October 29, 2008 to attract additional reinsurers to the Florida property and casualty market. Florida Insurance Commissioner Kevin McCarty has entered into three other reduced collateral agreements with alien insurers this year. Commissioner McCarty stated, “These collateral agreements are intended to encourage additional investment in Florida’s property insurance marketplace.” Despite entering into these collateral agreements, the Commissioner may still require 100% collateral from other unlicensed and unaccredited reinsurers.