The NAIC has published a draft proposal to grant recognition of regulatory equivalence to non-US insurance supervisors. In recognition of the international nature of the reinsurance market and the fact that there are only a few wholly US-owned reinsurers, the NAIC has been considering how best to modernise the US reinsurance regulatory framework to allow for an efficient and flexible market.
The NAIC is proposing to introduce a system of regulatory recognition within the US akin to the passporting system operating in the European Union. This would allow for single state recognition for authorised reinsurers. US licensed reinsurers would have a choice as to which state would act as their home state regulator. As long as the reinsurer complies with the regulations and laws of its home state it may operate in other states.
Furthermore, the new system would introduce a mechanism for the certification on non-US reinsurers via a "port of entry state". A new organisation, the Reinsurance Supervision Review Department would be given the task of reviewing the standard of regulation in other countries and determine which offered an equivalent degree of regulation to the US. The new system would have to establish a process for recognising the regulatory equivalence of other jurisdictions so that reinsurers would be able to operate in the US. Reinsurers from those countries with equivalent regulation would then go to their chosen "port of entry state" to seek a rating to determine the collateral required to operate in the US. However, what degree of collateral state insurers will ask to be posted by non-US reinsurers may well be a point of further contention between the US and EU reinsurance markets.
For further information: National Association of Insurance Supervisors draft proposal