Members of the National Association of Insurance Commissioners have adopted a reinsurance regulatory framework proposal that has been in the works for a decade.
Members of the plenary, the body at the NAIC, Kansas City, Mo., that represents all member jurisdictions, also voted here at the group’s winter meeting to adopt a companion proposal that establishes principles for creating a reinsurance regulatory department.
The Reinsurance Regulatory Modernization Framework, drafted by the NAIC Reinsurance Task Force, establishes a “conceptual framework” for creating 2 new classes of reinsurers in the United States: U.S.-domiciled national reinsurers and non-U.S.-based port-of-entry reinsurers.
The proposal also could lead to modification of the 100% collateral requirement for foreign reinsurers, and it sets up a framework for creating a new, state-based approach to reinsurance regulation.
A U.S. reinsurer would have to get a license from just one state, and a non-U.S. reinsurer from an approved jurisdiction would have to get certification from just one state.
Reinsurers that declined to become national reinsurers or POE reinsurers could continue to operate under the provisions of the current NAIC Credit for Reinsurance Model Act.
The framework proposal leaves out some details, such as the need for passage of federal legislation to give a state the authority to be the domicile state for a port of entry for reinsurers, according to Steven Goldman, the New Jersey banking and insurance commissioner, who is chair of the Reinsurance Task Force.
The proposal does set up an NAIC Reinsurance Supervision Review Department.
The RSRD will evaluate other countries’ reinsurance supervisory systems and establish standards for states that want to be certified to regulate reinsurance on a cross-border basis.
The RSRD would be in charge of deciding which non-U.S. jurisdictions could license the reinsurers that would be eligible for certification as POE reinsurers, according to NAIC officials.
The companion proposal, developed by Vermont, includes the following principles:
- The RSRD should be created as a transparent, publicly accountable entity with a governing board composed of state or district insurance regulators, and with director eligibility open to all state or district insurance commissioners, directors and superintendents.
- RSRD criteria relating to ceded premium volume should not unfairly discriminate against otherwise qualified small jurisdictions from approval as a home state or POE state supervisor
Kentucky Commissioner Sharon Clark voted against the framework proposal, but she said the principles in the companion proposal made her feel more comfortable about the proposal.
Indiana, Ohio, Utah and Wisconsin also voted against the proposal.
Property-casualty groups and the National Conference of Insurance Legislators, Troy, N.Y., have expressed concern about the framework proposal throughout the proposal’s development.
NCOIL President James Seward, a New York state senator, wrote to the NAIC Dec. 3 to say that NCOIL agreed with Vermont that the RSRD proposal needed stronger corporate governance provisions.
Seward also suggested in the letter that seeking a “federal hand in reinsurance” for the POE reinsurers “could lead states down the path to an undesirable federal regulator or to a national overseer in the form of the NAIC.”
The American Council of Life Insurers, Washington, wrote in May that it has favored broader reinsurance reform.