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Regulation and Compliance > State Regulation

New Calif. Re Rule Spark Concern

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Insurers say proposed California “credit for reinsurance” regulations could put some domestic companies and some licensed companies in California at a competitive disadvantage. [@@]

Today, all states operate under the National Association of Insurance Commissioners, Kansas City, Mo., credit for reinsurance model law, which seeks to prevent insurers from becoming insolvent due to reliance on financially shaky reinsurers.

The proposed new California regulations will set stricter standards for both the state’s domestic companies, and those licensed companies that have at least 20% of their business in the state.

Mike Koziol of the Property Casualty Insurers Association of America, Des Plaines, Ill., says the proposed rule will put additional burdens and costs on insurers wanting to do business in California. “It will make it hard for domestics because they will be held to a higher standard that even some foreign (out of state) that want to do business in California,” he says.

The California Department of Insurance held a workshop that addressed the topic in September 2004. At the workshop, industry representatives tried to soften the new rules’ effect on carriers. Although there was some improvement from an industry standpoint, the current draft does not represent all that much of a change, Koziol says.

Don Preston, a vice president at the American Council of Life Insurers, Washington, says his organization has no specific concerns about the draft yet. He says the ACLI is pleased that the California department appeared to take into account the issues the ACLI raised at the September hearing.

CDI official Arlene Joyce says comments on the revisions are expected by June 17. A new hearing should be set by the fall.

Koziol says he believes the proposed regulations could take effect by the end of the year.