Connecticut is fast carving a place for itself on the international supervision front lines with the addition of two new laws signed by the governor on June 4.
The new laws will give the state greater financial oversight of large, globally active insurance companies, according to the state. Connecticut is engaged in an effort to make itself a more attractive place for insurance businesses, including captives, under the governor’s October 2011 Act Promoting Economic Growth and Job Creation in the State, and increasingly for international reinsurers.
The primary goal for the two new insurance laws is to prevent a repeat of the 2008 financial crisis, according to Connecticut Insurance Commissioner Thomas B. Leonardi, who is heavily involved in international insurance supervision matters. One law would have the added benefit of allowing foreign reinsurers to free up capital and write more business in Connecticut and elsewhere.
The first new law is a holding company law (Public Act 103). It allows the insurance commissioner to establish “supervisory colleges,” consortiums of domestic and international regulators who conduct financial examinations of an insurer that is part of an internationally active holding company.
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The supervisory college authority is based on an NAIC model that other states have either adopted or are in the process of adopting.
Through it, the state insurance department will gain an overview of the whole group and have the ability to peer through the window of the holding company to gauge the impact of certain financial activities on a domestic insurer. The state sought this enhanced authority as a result of the financial crisis of 2008.
The second new law, the reinsurance law (Public Act 139), also based on an NAIC model law, grants the state insurance department authority to evaluate and review the financial strength of a foreign reinsurer and the U.S. insurance company that buys the reinsurance. It reduces collateral requirements on a sliding scale for those foreign reinsurers who meet the department’s financial requirements and who are regulated by credible insurance supervisors in their own country.
Connecticut now has the ability to level the playing field for foreign reinsurers “and that could result in lower costs to consumers in the long run,” Leonardi said.
Gov. Dannel P. Malloy signed the bills into law June 4 and was joined in his office by Leonardi and a group of international insurance regulators as well as NAIC CEO Terri Vaughan, Ph. D. They were already in town, participating in a two-day meeting in Hartford of the International Association of Insurance Supervisors (IAIS).