On October 6, 2011, the Florida Office of Insurance Regulation (“FOIR”) announced that the FOIR entered into reduced collateral agreements with Lloyd’s of London to 20% 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. Lloyd’s has a reported statutory capital and surplus of approximately $29.9 billion.
The Rule was enacted on October 29, 2008 to attract additional reinsurers to the Florida property and casualty market. Absent approval, a Florida-domiciled ceding insurer can not obtain credit for reinsurance from an unlicensed and unaccredited property and casualty reinsurer unless it maintains collateral for the entire amount of the reinsurer’s obligations. The Rule allows the FOIR to reduce the collateral requirements for such unlicensed and unaccredited reinsurers to anywhere between 0-100%, depending on the financial strength of such reinsurer.
The FOIR has entered into sixteen other reduced collateral agreements with alien insurers to date. For a copy of the official announcement, click here.