The Massachusetts Legislature’s Joint Committee on Financial Services is due to report next week on HB 881, An Act Relative to Reinsurance Requirements. Sponsored by Representative Michael Costello of Newburyport, the bill closely tracks the NAIC’s Revised Credit for Reinsurance Model Law, which has already been adopted in eighteen states, including New York, Connecticut, Rhode Island, and New Hampshire. A copy of the bill is available here.
If adopted, the bill would realign Massachusetts’ reinsurance regulations to make them more consistent with the increasingly global nature of insurance and reinsurance markets. The bill would allow the Massachusetts Commissioner of Insurance to evaluate the financial strengths of both a ceding company and a non-US reinsurer, as well as the relative quality of the reinsurer’s financial regulator. Based on that evaluation, the ceding company would be able to obtain credit for the reinsurance obtained, without the necessity for the reinsurer to post full collateral for all of its potential liabilities in a US depository institution. The bill would also permit the Commissioner to dispense with collateral requirements for intra-holding company reinsurance transactions between domestic insurers and their affiliated non-US reinsurance operations.
Under the operative procedural rules, the Joint Committee has until March 19 to issue its report. We will report further then.