On 1 December 2012, the Reinsurance (E) Task Force (“RTF”) met at the 2012 Fall National Meeting of the National Association of Insurance Commissioners held in Washington, DC.
Among the proposed 2013 charges for the RTF is the creation of the Reinsurance Financial Analysis (E) Working Group. This working group will support and assist the states in the review of reinsurance collateral reduction applications and will serve as a forum and coordinating group among the states on reinsurance issues relating to certified reinsurers that qualify for posting reduced collateral. It will support, encourage, promote and coordinate multi-state efforts with respect to certified reinsurers, including multi-state recognition of certified reinsurers. Among other things, this group will also provide advisory support with respect to issues related to determination of qualified jurisdictions from which certified reinsurers will be allowed.
Also with respect to reinsurance collateral reduction, the RTF released the draft “NAIC Process for Developing and Maintaining the List of Qualified Jurisdictions”. The RTF has exposed this draft for a 45-day comments period. Among the points addressed in the draft are an expedited review of certain jurisdictions (Bermuda, Germany, Switzerland and the UK) to be identified as qualified jurisdictions such that reinsurers from those jurisdictions could become certified sooner.
In addition, the RTF considered various other aspects of the reinsurance collateral reduction issues, including the accreditation standard for reinsurance ceded that was adopted earlier this year and state reduced reinsurance collateral implementation efforts. Currently, 11 states have adopted revisions to credit for reinsurance statutes and/or regulations incorporating reduced reinsurance collateral requirements for non-US reinsurers from qualified jurisdictions based on the revisions to the Credit for Reinsurance Model Law (#785) and Regulation (#786). However, only Florida and New York have approved certified reinsurers for collateral reduction at this time.
The RTF also discussed Dodd-Frank’s Nonadmitted and Reinsurance Reform Act (“NRRA”), including the RTF’s survey of states regarding NRRA issues. An important concern of states is with respect to the NRRA’s provisions that make a reinsurer subject to solvency regulation only by its domiciliary regulator. Under the NRRA, a reinsurer is an insurer “principally engaged in the business of reinsurance” and “does not conduct significant amounts of direct insurance as a percent of its net premiums”. There remains uncertainty among states about how to treat, for instance, reinsurers that also have large segments of insurance business.
At the meeting, the RTF also considered updates on referrals from other NAIC groups, including referrals from: (a) the Statutory Accounting Principals (E) Working Group Regarding Reinsurance Transactions Involving Death, Disability or Retirement Reserves; (b) the Financial Analysis (E) Working Group Regarding Risk Transfer/Quota-Share Reinsurance Contracts; and (c) the Financial Condition (E) Committee Regarding Collection of Undisputed Reinsurance Recoverable Balances Held by Ceding Insurers in Receivership. Regarding (b), the RTF will be considering loss limitations or loss corridors in quota share reinsurance contracts; as an initial matter, the RTF staff is doing research on how frequently such features are used and by how many companies.
Finally, the RTF heard reports on international reinsurance issues as well as some other items.