On July 27, 2009, the National Association of Insurance Commissioners (“NAIC”) released a revised draft of the Reinsurance Regulatory Modernization Act of 2009 (the “Act”), which was the result of a proposal adopted at its 2008 Winter Meeting to modernize reinsurance regulation. The Act is designed as federal legislation that, if enacted, would preempt state law. Specifically, the Act would:
- create a Reinsurance Supervision Review Department (“RSRD”) to evaluate which foreign regulatory regimes are similar to the U.S.;
- establish a single U.S. regulatory system, under which authorization in one jurisdiction (the “home state”) would give such U.S. reinsurers (known as “national reinsurers”) access to the entire domestic market; and
- institute a single point of entry certification process that would allow non-U.S. reinsurers from certain countries to enter the U.S. reinsurance market through a single point of entry (known as “POE reinsurers”).
Both the national reinsurers and POE reinsurers would be supervised by a single state (either the home state or POE state). National reinsurers would be licensed by the home state and POE reinsurers would be certified by the POE state. A non-U.S. reinsurer must be licensed by a non-U.S. jurisdiction recommended as eligible for recognition by the RSRD in order to be certified as a POE reinsurer. In order to qualify as a home state supervisor or a POE supervisor, a state must meet standards established by the RSRD. The Act also reduces the amount of collateral a POE reinsurer or national reinsurer is required to post in order for a ceding insurer to receive credit for reinsurance, based on the financial strength of the POE reinsurer or national reinsurer.
The NAIC is accepting comments on the Act from interested parties until the close of business on Monday, August 17, 2009. Click here for a clean copy of the Act, and click here for a redlined copy of the Act.